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    lincoln national stat4q06 lincoln national stat4q06 Document Transcript

    • Lincoln Statistical Report 2006 The financial data in this document is dated February 6, 2007 and has not been updated since that date. LNC does not intend to update this document.
    • Lincoln Financial Group Statistical Report Fourth Quarter 2006 Table of Contents LFG Analyst Coverage Notes Financial Highlights 1-4 Consolidated Expense Detail 5 Operating Results Summary 6 Consolidated Statements of Income 7 Consolidating Statements of Income from Operations 8-11 Consolidated Balance Sheet 12 Balance Sheet Data - Segment Highlights 13 Individual Markets Individual Life Insurance Income Statements & Operational Data 14 Operational Data 15 Account Value Roll Forward 16 Individual Annuities Income Statements & Operational Data 17 Account Value Roll Forward 18 Account Values 19 Employer Markets Defined Contribution Income Statements & Operational Data 20 Account Value Roll Forward 21 Supplemental Data 22 Executive Benefits Income Statements & Operational Data 23 Account Value Roll Forward and Supplemental Data 24 Group Protection Income Statements & Operational Data 25 Supplemental Data 26 Investment Management Income Statements 27 Assets Under Management Roll Forward 28 Lincoln UK Income Statements 29 Operational Data 30 Lincoln Financial Media 31 Other Operations 31 Domestic Deposits / Account Balances / Net Flows 32 Investment Data Assets Managed 33 Other Investment Data 34
    • LFG Analyst Coverage Fourth Quarter, 2006 PHONE NUMBER ANALYST FIRM Jeff Hopson 314-955-2639 A.G. Edwards Tamara Kravec 212-583-8212 Banc of America Securities Saul Martinez 212-272-3528 Bear Stearns Suneet Kamath 212-756-4587 Bernstein Colin Devine 212-816-1682 Citigroup Tom Gallagher 212-538-2010 Credit Suisse Darin Arita 212-250-7321 Deutsche Bank Jason Zucker 212-857-6146 Fox-Pitt Kelton Joan Zief 212-902-6778 Goldman Sachs & Company Jimmy Bhullar 212-622-6397 JP Morgan Jeff Schuman 860-722-5902 Keefe, Bruyette & Woods, Inc. Bob Glasspiegel 860-724-1203 Langen McAlenney Eric Berg 212-526-2805 Lehman Brothers Ed Spehar 212-449-4245 Merrill Lynch Nigel Dally 212-761-6235 Morgan Stanley Steven Schwartz 312-612-7686 Raymond James & Associates Inc. David Lewis 404-926-5097 SunTrust Robinson Humphrey Andrew Kligerman 212-713-2492 UBS John Hall 212-214-8032 Wachovia Investor inquiries may be directed to: Jim Sjoreen, Vice President, Investor Relations Email: jsjoreen@lfg.com Voice: (215) 448-1420 Fax: (215) 448-3962 Note: This list is provided for informational purposes only. LFG does not endorse the analyses, conclusions, or recommendations contained in any report issued by these or any other analysts. ** Statistical data will be available immediately after the release of earnings for each quarter through LNC’s Investor Relations Web site http://www.lfg.com/investor
    • 12/31/2006 ii NOTES On April 3, 2006, LNC completed its previously announced merger with Jefferson Pilot Corporation (quot;JPquot;). Beginning with the second quarter of 2006, we are reporting results through the following segments: Individual Markets - Annuities, Individual Markets - Life Insurance, Employer Markets - Retirement Products, Employer Markets - Group Protection, Investment Management, Lincoln UK and Lincoln Financial Media. Historical information presented in this report has been restated to reflect the new organizational structure. As described below, certain reclassifications have been made to historically reported items to reflect the new reporting practices of LNC. Definitions and Presentation quot;Income from Operations,quot; quot;Operating Revenue,quot; quot;Return on Capital,quot; and quot;Station Operating Incomequot; are non-GAAP financial measures and do not replace GAAP revenue and net income (loss). Detailed reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure are included in this statistical supplement. We exclude the after-tax effects of the following items from GAAP net income to arrive at income from * operations: * Realized gains and losses on investments and derivatives, * Gains and losses related to reinsurance embedded derivatives/trading account securities, * The cumulative effect of accounting changes, * Reserve changes on business sold through reinsurance net of related deferred gain amortization, * Gains and losses on the sale of subsidiaries and blocks of business, and * Loss on early retirement of debt, including subordinated debt NOTE: Income from operations is lower than previously reported as it now includes restructuring charges previously excluded in the determination of income from operations * Operating revenue represents revenue excluding the following, as applicable: * Realized gains or losses on investments and derivatives, * Gains and losses related to reinsurance embedded derivatives/trading account securities, * Gains and losses on the sale of subsidiaries and blocks of business, and * Deferred gain amortization related to reserve changes on business sold through reinsurance Return on capital measures the effectiveness of LNC' use of its total capital, which includes equity (excluding accumulated s * other comprehensive income), debt, capital securities and junior subordinated debentures issued to affiliated trusts. Return on capital is calculated by dividing annualized income from operations (after adding back interest expense) by average capital. The difference between return on capital and return on shareholders' equity represents the effect of leveraging on LNC' consolidated results. s Station operating income is calculated as communications revenues less operating costs and expenses before depreciation * and amortization. Income from operations, operating revenue, return on capital, and station operating income are internal measures used by LNC in the management of its operations. Management believes that these performance measures explain the results of operations of LNC' ongoing operations in a s manner that allows for a better understanding of the underlying trends in LNC' current business because the excluded items are either s unpredictable and/or not related to decisions regarding the underlying businesses. Certain operating and statistical measures are included in this report to provide supplemental data regarding the * performance of LNC’s current business. These measures include deposits, sales, net flows, first year premium, inforce, spreads, and assets under management. * Sales as reported consist of the following: * Universal life (quot;ULquot;), including Moneyguard, and COLI - first year commissionable premium plus 5% of excess premium received, including UL internal replacements * Whole life and term - first year paid premium * Annuity - deposits from new and existing customers * Group Protection - annualized first year premium from new policies * Investment Management Retail Sales and Institutional Inflows - contributions, transfer in kind purchases, and reinvested dividends for new and existing accounts. Reclassifications Certain reclassifications have been made in the historical presentation of certain revenue and expense items. The principal reclassifications consist of the following: Deferred Front End Loads (quot;DFELquot;) - capitalization and amortization of DFEL is reported as a component of expense * assessments revenue. Depending on the segment, these had previously been reported as a component of either other revenue, benefits expense or DAC amortization. Investment Management Advisory Fees and General and Administrative Expenses - certain reclassifications have been * made between revenue and expenses for such items as distribution fees and management fee waivers to conform to current industry practices. Commissions and general & administrative expenses - we reclassified certain distribution expenses to commissions which * had previously been reported in general & administrative expenses. This change impacted the Individual Markets Life segment and is also reflected in our consolidated presentation. We made several reclassifications within our Other Operations income statement to separately present intersegment * eliminations affecting revenues and expenses and we have also disclosed some additional line items. These changes were incorporated into all pages that reference Other Operations.
    • 12/31/2006 PAGE 1 Financial Highlights Unaudited [Millions of Dollars, except Common Share Data] For the Quarter Ended December 31 For the Year Ended December 31 2005 2005 2006 2006 Amount Change % Change Amount Change % Change Amount Amount Income from Operations - By Segment Individual Life Insurance 157.4 $ 73.8 $ 83.6 113.3% 496.3 $ 259.5 $ 236.8 91.3% $ $ Individual Annuities 70.9 52.9 74.6% 252.0 156.5 62.1% 123.8 408.5 Individual Markets 144.7 136.4 94.3% 511.5 393.2 76.9% 281.1 904.7 Defined Contribution 45.2 (0.6) -1.3% 187.1 16.7 8.9% 44.6 203.8 Executive Benefits 9.5 3.2 33.7% 19.6 29.6 151.0% 12.7 49.2 Group Protection - 33.2 NM - 99.0 NM 33.2 99.0 Employer Markets 54.7 35.8 65.4% 206.7 145.3 70.3% 90.5 352.0 Investment Management 8.9 5.5 61.8% 16.8 38.3 228.0% 14.4 55.1 Lincoln UK 13.6 (3.7) -27.2% 43.3 (4.4) -10.2% 9.9 38.9 Lincoln Financial Media - 17.5 NM - 44.0 NM 17.5 44.0 Other Operations 9.6 (48.0) NM 54.3 (130.1) NM (38.4) (75.8) Total Income from Operations (1) 231.4 143.8 62.1% 832.7 486.3 58.4% 375.2 1,319.0 0.0 0.0 Realized gains (losses) (6.1) 15.5 254.1% (14.6) 12.0 82.2% 9.4 (2.6) Net gain (loss) on reinsurance derivative/trading account securities - 0.1 NM 3.0 (1.0) -33.3% 0.1 2.0 Gain on sale of subsidiaries/ businesses - - NM 9.3 (9.3) -100.0% - - Reserve development/ amortization of related deferred gain 0.2 - - 0.8 0.1 12.5% 0.2 0.9 Loss on early retirement of subordinated debt - (3.6) NM - (3.6) NM (3.6) (3.6) Net Income 381.3 $ 225.4 $ 155.9 69.2% 1,315.6 $ 831.1 $ 484.5 58.3% $ $ 0.0 0.1 0.0 0.1 Earnings per share (diluted) Income from Operations (1) $ 1.31 $ 0.03 2.3% 5.14 $ 4.73 $ 0.41 8.7% $ 1.34 $ Realized losses (0.03) 0.06 200.0% (0.08) 0.07 87.5% 0.03 (0.01) Net gain (loss) on reinsurance derivative/trading account securities - - NM 0.02 (0.01) -50.0% - 0.01 Gain on sale of subsidiaries/ businesses - - NM 0.05 (0.05) -100.0% - - Reserve development/ amortization of related deferred gain - - NM - - NM - - Loss on early retirement of subordinated debt - (0.01) NM - (0.01) NM (0.01) (0.01) Net Income 1.36 $ 1.28 $ 0.08 6.3% 5.13 $ 4.72 $ 0.41 8.7% $ $ - - - - Operating Revenue- By Segment Individual Life Insurance 958.4 $ 501.1 $ 457.3 91.3% 3,255.8 $ 1,910.6 $ 1,345.2 70.4% $ $ Individual Annuities 372.1 265.2 71.3% 1,422.5 738.8 51.9% 637.3 2,161.3 Individual Markets 873.2 722.5 82.7% 3,333.1 2,084.0 62.5% 1,595.7 5,417.1 Defined Contribution 241.2 3.8 1.6% 947.5 40.5 4.3% 245.0 988.0 Executive Benefits 61.6 47.5 77.1% 227.4 144.4 63.5% 109.1 371.8 Group Protection - 344.8 NM - 1,031.8 NM 344.8 1,031.8 Employer Markets 302.8 396.1 130.8% 1,174.9 1,216.7 103.6% 698.9 2,391.6 Investment Management 127.9 21.0 16.4% 475.3 88.2 18.6% 148.9 563.5 Lincoln UK 62.6 22.2 35.5% 318.4 (10.4) -3.3% 84.8 308.0 Lincoln Financial Media - 70.2 NM - 187.8 NM 70.2 187.8 Other Operations 28.9 16.7 57.8% 175.2 21.2 12.1% 45.6 196.4 Total Operating Revenue 1,395.4 1,248.8 89.5% 5,476.8 3,587.5 65.5% 2,644.2 9,064.3 (0.1) - - - Realized losses (9.3) 22.1 237.6% (22.1) 15.4 69.7% 12.8 (6.7) Gain (loss) on reinsurance derivative/trading account securities - 1.2 NM 4.6 (0.5) -10.9% 1.2 4.1 Gain on sale of subsidiaries/ businesses - - NM 14.2 (14.2) -100.0% - - Amortization of deferred gain-reserve development 0.3 - - 1.2 0.1 8.3% 0.3 1.3 Total Revenue $ 1,386.4 $ 1,272.0 91.7% 9,062.9 $ 5,474.8 $ 3,588.1 65.5% $ 2,658.4 $ 0.0 0.0 (1) Income from operations includes after-tax restructuring charges of $2.1 million, or 1 cent per share, and $1.1 million, or 1 cent per share, for the quarters ended December 31, 2006 and 2005, respectively, and $9.3 million, or 4 cents per share, and $19.0 million, or 11 cents per share, for the full year ended December 31, 2006 and 2005, respectively. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 2 Financial Highlights Unaudited [in Billions] Operational Data by Segment For the Quarter Ended December 31 For the Year Ended December 31 2005 2005 2006 2006 Amount Change % Change Amount Change % Change Amount Amount Individual Markets Individual Annuities Gross deposits $ 1.999 $ 1.161 58.1% $ 7.526 $ 3.230 42.9% $ 3.161 $ 10.756 Net flows 0.767 0.125 16.3% 2.876 (0.211) -7.3% 0.892 2.665 Account values (gross) 48.495 18.219 37.6% 48.495 18.219 37.6% 66.714 66.714 Account values (net of reinsurance) 46.262 18.640 40.3% 46.262 18.640 40.3% 64.902 64.902 Individual Life Insurance Sales (in millions) (1) 90.7 127.4 140.5% 303.2 267.6 88.3% 218.1 570.8 Life insurance in-force 316.641 184.736 58.3% 316.641 184.736 58.3% 501.376 501.376 Account values 14.051 12.439 88.5% 14.051 12.439 88.5% 26.490 26.490 Employer Markets Defined Contribution (2) Gross deposits $ 1.078 $ 0.021 1.9% $ 4.403 $ 0.182 4.1% $ 1.099 $ 4.585 Net flows (0.026) 0.036 138.5% 0.419 (0.078) -18.6% 0.010 0.342 Account values - annuities 26.701 1.781 6.7% 26.701 1.781 6.7% 28.482 28.482 Alliance Mutual Funds 3.772 1.403 37.2% 3.772 1.403 37.2% 5.175 5.175 Account values including Alliance Mutual Funds 30.473 3.184 10.4% 30.473 3.184 10.4% 33.656 33.656 Executive Benefits COLI/BOLI sales (in millions) 11.1 21.4 192.8% 49.8 33.1 66.5% 32.5 82.9 Life insurance in-force 7.729 7.917 102.4% 7.729 7.917 102.4% 15.645 15.645 Account values 1.318 2.987 226.6% 1.318 2.987 226.6% 4.305 4.305 Group Protection Annualized sales (in millions) - 113.1 NM - 208.7 NM 113.1 208.7 Loss ratio (3) - NM NM - NM NM 69.1% 67.4% Investment Management Segment Retail deposits 3.192 $ 3.629 $ (0.437) -12.0% $ 15.101 $ (2.110) -14.0% $ $ 12.991 Retail net flows 1.148 (1.288) NM 6.442 (5.255) -81.6% (0.140) 1.187 Institutional in-flows 4.833 0.055 1.1% 16.302 (1.200) -7.4% 4.888 15.102 Institutional net flows 1.733 0.934 53.9% 8.778 (0.787) -9.0% 2.666 7.991 Total Deposits and In-flows 8.462 (0.382) -4.5% 31.403 (3.310) -10.5% 8.080 28.093 Total Net Flows 2.881 (0.354) -12.3% 15.220 (6.043) -39.7% 2.526 9.177 Assets Under Management- Retail and Institutional 77.633 19.674 25.3% 77.633 19.674 25.3% 97.307 97.307 Assets Under Management - General Account 43.086 23.981 55.7% 43.086 23.981 55.7% 67.066 67.066 Assets Under Management - Total Segment 120.719 43.654 36.2% 120.719 43.654 36.2% 164.373 164.373 Consolidated Domestic Retail Deposits $ 6.737 $ 1.068 15.9% $ 26.835 $ 2.225 8.3% $ 7.805 $ 29.060 Domestic Retail Account Balances 121.858 43.428 35.6% 121.858 43.428 35.6% 165.287 165.287 Domestic Retail Net Flows 2.354 (0.964) -41.0% 11.144 (4.878) -43.8% 1.390 6.266 Domestic Deposits 11.305 1.279 11.3% 42.107 1.121 2.7% 12.584 43.229 Domestic Net Flows 4.285 (0.160) -3.7% 20.045 (5.666) -28.3% 4.125 14.378 Assets Under Management 171.755 61.768 36.0% 171.755 61.768 36.0% 233.523 233.523 (1) Sales for Individual Life Insurance consist of first year commissionable premium for Universal life (quot;ULquot;), including Moneyguard, and COLI plus 5% of excess premium received, including UL internal replacements, and first year paid premiums for Whole life and Term products (2) Includes deposits for Alliance Mutual Funds which are not included in separate account liabilities on our balance sheet. (3) Represents combined loss ratio for Life, Disability and Dental business. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 3 Financial Highlights Unaudited [Millions of Dollars, except Common Share Data] For the Quarter Ended December 31 For the Year Ended December 31 2005 2005 2006 2006 Amount Change % Change Amount Change % Change Amount Amount Balance Sheet Assets - End of Period $ 124,859.6 $ 53,634.2 43.0% $ 124,859.6 $ 53,634.2 43.0% $ 178,493.7 $ 178,493.7 Shareholders' Equity Beg of period (including AOCI) $ 6,284.4 $ 5,758.7 $ 6,175.6 $ 208.8 $ 12,043.2 $ 6,384.4 End of period (including AOCI) 6,384.4 5,816.6 6,384.4 5,816.6 12,201.0 12,201.0 End of period (excluding AOCI) 5,856.6 5,731.3 5,856.6 5,731.3 11,587.9 11,587.9 Average equity (excluding AOCI) 5,760.0 5,751.9 5,507.1 4,546.9 11,512.0 10,054.0 Return on Equity Net income/average equity (excluding AOCI) 15.7% 15.1% 13.2% 13.1% Inc from operations/average equity (excluding AOCI) 16.1% 15.1% 13.0% 13.1% Return on Capital Inc from operations/average capital 13.6% 12.6% 10.6% 10.7% Common Stock Outstanding Average for the period - diluted 176.6 103.8 58.8% 176.1 80.0 45.4% 280.4 256.2 End of period - assuming conv of preferreds 174.0 101.9 58.6% 174.0 101.9 58.6% 276.0 276.0 End of period - diluted 176.9 103.3 58.4% 176.9 103.3 58.4% 280.2 280.2 Book value (including AOCI) $ 36.69 $ 7.52 20.5% $ 36.69 $ 7.52 20.5% $ 44.21 $ 44.21 Book value (excluding AOCI) $ 33.66 $ 8.34 24.8% $ 33.66 $ 8.34 24.8% $ 41.99 $ 41.99 Cash Returned to Shareholders Share repurchase - dollar amount 150.0 $ - $ 150.0 $ 103.6 $ 898.9 $ $ 1,002.5 Dividends declared to shareholders 66.6 42.3 257.7 170.8 108.9 428.6 Total Cash Returned to Shareholders $ 258.9 $ 66.6 $ 192.3 $ 1,431.1 $ 361.3 $ 1,069.8 Share repurchase - number of shares - 2.504 2.331 14.546 2.504 16.877 Dividend declared on common stock - per share 0.395 $ 0.380 $ 0.015 3.9% 1.535 $ 1.475 $ 0.060 4.1% $ $ Dividend payout ratio (1) 29.7% 31.3% 29.0% 29.9% Annualized yield (2) 2.9% 2.8% 2.4% 2.3% Comprehensive Income (Loss) Net income 381.3 $ 225.4 1,315.6 $ 831.1 $ $ Net unrealized gains (losses) on securities (72.4) (326.3) (8.4) (27.0) Gains (losses) on derivatives (1.5) (6.7) 6.5 55.1 Foreign currency translation (16.1) (70.9) 28.7 81.7 Minimum pension liability adjustment (2.9) 1.0 63.2 59.5 Adjustment to initially apply SFAS 158 (4) - - (84.0) (84.0) Comprehensive Income $ 387.3 $ 132.4 $ 1,400.9 $ 428.2 Ratios: Debt to total capitalization (3) 19.9% 19.9% 21.1% 21.1% Debt to equity (3) 24.8% 24.8% 26.7% 26.7% Ratings as of February 5, 2007: A.M. Best Fitch Moody's Standard & Poors Senior Debt Ratings: a A A3 A+ Financial Strength Ratings: Lincoln National Life Insurance Company A+ AA Aa3 AA First Penn-Pacific Life Insurance Company A+ AA A1 AA- Lincoln Life & Annuity Company of New York A+ AA Aa3 AA Jefferson-Pilot Life Insurance Company A+ AA Aa3 AA Jefferson Pilot Financial Insurance Company A+ AA Aa3 AA Jefferson Pilot LifeAmerica Insurance Company A+ AA N/R AA [1] Indicated dividend divided by net income [2] Indicated dividend divided by the closing price [3] Equity used in calculation excludes accumulated other comprehensive income (loss). Capital securities are considered 25% debt and 75% equity. The calculation for the second quarter of 2006 includes adjustments to beginning equity for stock issued in connection with the April 3, 2006 merger with Jefferson-Pilot Corporation (quot;JPquot;) and the accelerated stock repurchase transaction. (4) SFAS 158 was adopted effective December 31, 2006 which requires the disclosure of the funded status of our pension and post-retirement benefit plans on the balance sheet. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 4 (1) Combined Production Data Unaudited [in Billions] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Individual Markets Individual Life Insurance Sales by Product (millions) Universal Life Excluding MoneyGuard $ 117.2 $ 83.4 $ 97.5 $ 119.9 51.5% $ 422.8 13.1% $ 177.6 $ 478.3 MoneyGuard 9.4 7.7 7.5 8.3 -17.0% 33.9 -7.7% 7.8 31.3 Total 126.5 91.1 105.0 128.2 46.6% 456.7 11.6% 185.4 509.6 Variable universal life 20.6 16.4 15.7 13.0 7.3% 70.4 -4.5% 22.1 67.2 Whole life 0.9 1.2 0.4 0.7 -33.3% 3.8 -23.7% 0.6 2.9 Term 10.7 11.2 11.3 10.7 -6.5% 41.4 4.1% 10.0 43.1 Total Sales by Product $ 158.7 $ 120.0 $ 132.3 $ 152.5 37.4% $ 572.3 8.8% $ 218.1 $ 622.9 $ - Individual Annuity Deposits Fixed $ 0.567 $ 0.560 $ 0.644 $ 0.818 50.8% $ 2.345 22.7% $ 0.855 $ 2.878 Variable 1.533 1.666 1.867 1.658 34.4% 5.596 29.6% 2.061 7.252 Indexed annuities 0.178 0.173 0.228 0.244 37.6% 0.788 12.9% 0.245 0.890 Total Individual Annuities $ 2.278 $ 2.399 $ 2.739 $ 2.720 38.8% $ 8.728 26.2% $ 3.161 $ 11.018 $ - Employer Markets Defined Contribution Fixed $ 0.240 $ 0.253 $ 0.242 $ 0.268 -23.8% $ 1.083 -12.7% $ 0.183 $ 0.946 Variable 0.616 0.669 0.714 0.583 -9.3% 2.254 12.0% 0.559 2.525 0.856 0.923 0.955 0.851 -13.3% 3.337 4.0% 0.742 3.471 Alliance Mutual Funds Deposits 0.223 0.318 0.204 0.235 60.1% 1.066 4.4% 0.357 1.113 Total Annuity and Alliance Mutual Funds $ 1.078 $ 1.241 $ 1.159 $ 1.086 1.9% $ 4.403 4.1% $ 1.099 $ 4.585 Executive Benefits COLI/BOLI sales (millions) $ 12.7 $ 17.5 $ 17.2 $ 16.3 155.9% $ 52.4 59.4% $ 32.5 $ 83.5 Group Protection Annualized Sales (millions) Life $ 29.4 $ 23.6 $ 15.3 $ 19.4 46.6% $ 86.7 17.0% $ 43.1 $ 101.4 Disability 44.5 34.2 22.9 24.7 27.9% 141.0 -1.6% 56.9 138.7 Dental 6.9 6.2 7.1 6.1 89.9% 33.7 -3.3% 13.1 32.6 Investment Management Sales and Inflows Retail Annuities $ 0.713 $ 0.885 $ 0.869 $ 0.960 30.7% $ 2.768 31.8% $ 0.932 $ 3.647 Mutual funds 1.657 1.329 1.370 1.151 6.7% 5.994 -6.3% 1.768 5.617 Managed accounts & other 1.260 1.806 1.043 0.386 -60.9% 6.339 -41.2% 0.493 3.728 3.629 4.019 3.282 2.497 -12.0% 15.101 -14.0% 3.192 12.991 4.833 5.044 2.764 2.406 1.1% 16.302 -7.4% Institutional 4.888 15.102 Total Sales and Inflows -4.5% $ 31.403 -10.5% $ 8.462 $ 9.063 $ 6.046 $ 4.904 $ 8.080 $ 28.093 Total Annuity & Alliance Mutual Fund Deposits Fixed Annuities Individual $ 0.745 $ 0.733 $ 0.872 $ 1.062 47.7% $ 3.133 20.2% $ 1.100 $ 3.767 Employer Markets 0.240 0.253 0.242 0.268 -23.8% 1.083 -12.7% 0.183 0.946 0.985 0.986 1.114 1.330 30.3% 4.215 11.8% 1.283 4.713 Variable Annuities Individual 1.533 1.666 1.867 1.658 34.4% 5.596 29.6% 2.061 7.252 Employer Markets 0.616 0.669 0.714 0.583 -9.3% 2.254 12.0% 0.559 2.525 2.148 2.335 2.581 2.241 21.9% 7.850 24.5% 2.619 9.777 Total Annuities 3.134 3.322 3.695 3.571 24.5% 12.065 20.1% 3.903 14.491 Alliance Mutual Funds 0.223 0.318 0.204 0.235 60.1% 1.066 4.4% 0.357 1.113 Total Annuity and Alliance Mutual Funds $ 3.356 $ 3.640 $ 3.898 $ 3.806 26.9% $ 13.131 18.8% $ 4.259 $ 15.604 (1) This schedule combines the previously reported data for LNC and JP and does not reflect any adjustments that may have resulted had the April 4, 2006 merger been completed prior to the periods presented. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 5 Consolidated Expense Detail Unaudited (In Millions) Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 $ 216.4 $ 212.9 $ 362.0 $ 382.6 114.7% $ 790.3 80.0% Commissions $ 464.7 $ 1,422.2 General and administrative expenses: General and administrative expenses 313.7 287.7 374.1 400.6 38.5% 1,250.8 19.7% 434.4 1,496.8 Merger-related expenses - - 7.4 12.1 NM - NM 15.8 35.3 Total general and administrative expenses 313.7 287.7 381.5 412.7 43.5% 1,250.8 22.5% excluding Broker/Dealer 450.2 1,532.1 Restructuring charges 1.5 0.3 9.6 1.0 120.0% 29.3 -51.5% 3.3 14.2 Taxes, licenses and fees 17.3 33.5 47.3 50.3 177.5% 95.5 87.6% 48.0 179.2 Interest (1) 21.8 21.7 65.0 67.3 222.9% 87.2 157.3% 70.4 224.4 570.7 556.1 865.4 914.0 81.6% 2,253.0 49.7% Total commissions and expenses incurred 1,036.6 3,372.1 -96.9% (937.6) -68.4% Less: commissions and expenses capitalized (263.0) (244.5) (391.6) (424.3) (517.9) (1,578.5) Amortization: DAC/VOBA Amortization 144.8 165.0 222.2 225.9 92.3% 540.7 64.9% 278.5 891.7 Amortization of intangibles 2.0 2.0 6.6 3.1 120.0% 7.8 105.1% 4.4 16.0 146.8 167.0 228.7 229.0 92.6% 548.5 65.5% Total amortization 282.8 907.5 54.2 46.6 79.3 76.6 47.6% 204.3 38.3% Broker/Dealer commissions and G&A 80.0 282.5 $ 508.8 $ 525.1 $ 781.9 $ 795.3 73.3% $ 2,068.1 44.3% Total $ 881.5 $ 2,983.8 (0.0) 0.0 (0.0) 0.1 - (0.1) Merger-related expenses: (2) Severance and employee-related charges $ - $ - $ 12.8 $ 8.4 NM $ - NM $ 6.2 $ 27.4 Systems integration and related expenses - - 0.8 1.5 NM - NM 5.4 7.7 Other expenses - - 3.1 3.2 NM - NM 7.5 13.8 $ - $ - $ 16.7 $ 13.1 NM $ - NM Total merger-related expenses $ 19.1 $ 48.9 Note: The Consolidated Expense Detail data is presented on a GAAP basis. (1) Interest expense for the fourth quarter and full year 2006 includes $5.6 million related to losses on early extinguishment of debt. (2) Represents merger-related expenses included in general and administrative expenses and restructuring charges. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 6 Operating Results Summary Unaudited [Millions of Dollars, except Common Share Data] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Individual Life Insurance $ 501.1 $ 500.6 $ 901.4 $ 895.3 91.3% $ 1,910.6 $ 70.4% $ 958.4 3,255.8 Individual Annuities 372.1 374.8 552.6 596.5 71.3% 1,422.5 51.9% 637.3 2,161.3 Individual Markets 873.2 875.4 1,454.0 1,491.8 82.7% 3,333.1 62.5% 1,595.7 5,417.1 Defined Contribution 241.2 249.2 248.9 245.1 1.6% 947.5 4.3% 245.0 988.0 Executive Benefits 61.6 57.2 101.2 104.3 77.1% 227.4 63.5% 109.1 371.8 Group Protection - - 354.9 332.1 NM - NM 344.8 1,031.8 Employer Markets 302.8 306.4 704.9 681.5 130.8% 1,174.9 103.6% 698.9 2,391.6 Investment Management 127.9 139.6 134.7 140.4 16.4% 475.3 18.6% 148.9 563.5 Lincoln UK 62.6 69.5 81.4 72.3 35.5% 318.4 -3.3% 84.8 308.0 Lincoln Financial Media - - 57.7 60.0 NM - NM 70.2 187.8 Other Operations 28.9 31.7 67.6 51.4 57.8% 175.2 12.1% 45.6 196.4 Total Operating Revenue 1,395.4 1,422.6 2,500.3 2,497.4 89.5% 5,476.8 65.5% 2,644.2 9,064.3 (0.1) - - Realized gains (losses) on investments and derivatives (9.3) (6.9) (6.7) (5.8) 237.6% (22.1) 69.7% 12.8 (6.7) Net gain (loss) on reinsurance derivative/trading account securities - 5.9 1.8 (4.7) NM 4.6 -10.9% 1.2 4.1 Gain on sale of subsidiaries/ businesses - - - - NM 14.2 NM - - Amortization of deferred gain-reserve development 0.3 0.3 0.3 0.3 1.2 8.3% 0.3 1.3 Total Revenue $ 1,386.4 $ 1,421.8 $ 2,495.6 $ 2,487.2 $ 91.7% $ 5,474.8 $ 65.5% 2,658.4 9,062.9 (0.0) 0.1 0.1 - - (0.0) - (1) Income from Operations Individual Life Insurance $ 73.8 $ 69.0 $ 147.1 $ 122.8 $ 113.3% $ 259.5 $ 91.3% 157.4 496.3 Individual Annuities 70.9 66.4 89.0 129.4 74.6% 252.0 62.1% 123.8 408.5 Individual Markets 144.7 135.4 236.1 252.2 94.3% 511.5 76.9% 281.1 904.7 Defined Contribution 45.2 52.5 54.3 52.5 -1.3% 187.1 8.9% 44.6 203.8 Executive Benefits 9.5 7.5 16.2 12.8 33.7% 19.6 151.0% 12.7 49.2 Group Protection - - 37.0 28.8 NM - NM 33.2 99.0 Employer Markets 54.7 60.0 107.6 94.0 65.4% 206.7 70.3% 90.5 352.0 Investment Management 8.9 15.3 12.0 13.4 61.8% 16.8 228.0% 14.4 55.1 Lincoln UK 13.6 10.7 9.9 8.3 -27.2% 43.3 -10.2% 9.9 38.9 Lincoln Financial Media - - 11.9 14.6 NM - NM 17.5 44.0 Other Operations 9.6 0.1 (26.1) (11.5) NM 54.3 NM (38.4) (75.8) (1) Income from Operations 231.4 221.4 351.4 371.0 62.1% 832.7 58.4% 375.2 1,319.0 0.0 0.1 - 0.1 (0.1) 0.0 0.0 Realized gains (losses) on investments and derivatives (6.1) (4.2) (3.8) (4.1) 254.1% (14.6) 82.2% 9.4 (2.6) Net gain (loss) on reinsurance derivative/trading account securities - 3.8 1.2 (3.1) NM 3.0 -33.3% 0.1 2.0 Gain on sale of subsidiaries/ businesses - - - - NM 9.3 -100.0% - - Reserve development/ amortization of related deferred gain 0.2 0.2 0.2 0.2 0.8 12.5% 0.2 0.9 Loss on early retirement of debt - - - - NM - NM (3.6) (3.6) Net Income $ 225.4 $ 221.2 $ 349.0 $ 364.1 $ 69.2% $ 831.1 58.3% 381.3 $ 1,315.6 0.1 0.0 - (0.1) (0.0) 0.1 0.0 OTHER DATA Three Months Ended Year Ended Dec. March June Sept. Dec. Dec. Dec. 2005 2006 2006 2006 2005 2006 2006 Shareholders' Equity Beg of period (including AOCI) $ 6,284.4 $ 6,384.4 $ 6,338.2 $ 11,404.8 $ 6,175.6 $ 12,043.2 $ 6,384.4 End of period (including AOCI) 6,384.4 6,338.2 11,404.8 12,043.2 6,384.4 12,201.0 12,201.0 End of period (excluding AOCI) 5,856.6 6,053.2 11,439.8 11,436.0 5,856.6 11,587.9 11,587.9 Average equity (excluding AOCI) (2) 5,760.0 5,954.9 11,311.3 11,437.9 5,507.1 11,512.0 10,054.0 Common Shares Outstanding Average for the period - diluted 176.6 177.9 282.6 282.4 176.1 280.4 256.2 End of period - diluted 176.9 178.5 285.0 281.3 176.9 280.2 280.2 Per Share Data (Diluted) Net Income $ 1.28 $ 1.24 $ 1.23 $ 1.29 $ 4.72 $ 1.36 $ 5.13 (1) Income from Operations 1.31 1.25 1.24 1.31 4.73 1.34 5.14 Shareholders' Equity Per Share Shareholders' Equity (including AOCI) $ 36.69 $ 35.99 $ 40.48 $ 43.39 $ 36.69 $ 44.21 $ 44.21 Shareholders' Equity (excluding AOCI) 33.66 34.37 40.60 41.20 33.66 41.99 41.99 Dividends declared (Common Stock) 0.380 0.380 0.380 0.380 1.475 0.395 1.535 Return on Equity Net Income/Average Equity 15.7% 14.9% 12.3% 12.7% 15.1% 13.2% 13.1% Inc from Operations/Average Equity 16.1% 14.9% 12.4% 13.0% 15.1% 13.0% 13.1% Market Value of Common Stock Highest price $ 54.41 $ 57.97 $ 60.52 $ 63.47 $ 54.41 $ 66.72 $ 66.72 Lowest price 46.94 52.00 54.30 53.94 41.59 61.74 52.00 Closing price $ 53.03 $ 54.59 $ 56.44 $ 62.08 $ 53.03 $ 66.40 $ 66.40 (1) Income from operations includes after-tax restructuring charges of $1.1 million, or 1 cent per share, for the fourth quarter of 2005; $0.2 million, or -0- cents per share, for the first quarter of 2006, $6.2 million, or 2 cents per share, for the second quarter of 2006, $0.6 million, or -0- cents per share, for the third quarter of 2006, and $2.1 million, or 1 cent per share, for the fourth quarter of 2006. Results for the years ended December 31, 2006 and 2005 include $9.3 million, or 4 cents per share, and $19.0 million, or 11 cents per share, respectively. (2) Average equity was adjusted to reflect the merger with Jefferson-Pilot effective April 3, 2006. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 7 Consolidated Statements of Income Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Revenue Premiums $ 82.4 $ 78.4 $ 454.3 $ 425.7 $ NM $ 308.4 $ NM 448.1 1,406.5 Surrender charges 18.0 18.7 27.3 26.6 66.1% 73.3 39.8% 29.9 102.5 Mortality assessments 145.1 146.2 294.7 294.9 103.9% 568.3 81.5% 295.9 1,031.7 Expense assessments 294.1 309.5 370.1 357.8 47.0% 1,110.0 32.4% 432.3 1,469.8 Investment advisory fees 70.9 77.8 81.2 82.9 21.4% 255.9 28.1% 86.1 327.9 Communications revenue - - 57.5 59.8 NM - NM 69.6 186.9 Net investment income 668.2 678.4 1,068.2 1,107.9 68.6% 2,702.7 47.3% 1,126.3 3,980.8 Other revenue and fees 97.6 94.8 128.2 123.1 40.6% 382.6 26.3% 137.2 483.2 Amortization of deferred gain 18.9 18.8 18.8 18.8 -0.5% 75.7 -0.9% 18.8 75.0 Amortization of deferred gain-reserve development 0.3 0.3 0.3 0.3 1.2 8.3% 0.3 1.3 Realized gains (losses) (9.3) (1.0) (5.0) (10.5) 249.5% (3.3) 18.2% 13.9 (2.7) Total Revenue 1,386.3 1,421.8 2,495.6 2,487.2 91.8% 5,474.7 65.5% 2,658.4 9,062.9 - - (0.0) - Benefits and Expenses Insurance benefits 198.0 200.4 589.3 566.2 183.9% 805.5 138.1% 562.2 1,918.2 Interest credited to contractholder funds 383.4 381.3 589.3 634.4 68.6% 1,526.3 47.5% 646.5 2,251.5 Communications expenses - - 29.8 31.4 NM - NM 36.9 98.1 Operating and acquisition expenses 469.7 469.9 669.5 677.6 62.5% 1,885.5 36.8% 763.1 2,580.2 Taxes, licenses and fees 17.3 33.5 47.3 50.3 177.5% 95.5 87.6% 48.0 179.2 Interest and debt expense 21.8 21.7 65.0 67.3 222.9% 87.2 157.3% 70.4 224.4 Total Benefits and Expenses 1,090.2 1,106.8 1,990.3 2,027.3 95.1% 4,400.0 64.8% 2,127.2 7,251.6 (0.0) - (0.0) Income Before Federal Income Tax 296.1 315.0 505.3 459.9 79.4% 1,074.6 68.6% 531.3 1,811.3 Federal income taxes 70.6 93.9 156.3 95.8 112.3% 243.6 103.5% 149.9 495.7 Net Income $ 225.4 $ 221.2 $ 349.0 $ 364.1 69.2% $ 831.0 58.3% $ 381.3 $ 1,315.6 0.0 0.0 Roll Forward of Deferred Acquisition Costs Three Months Ended Year Ended Dec. March June Sept. Dec. & Value of Business Acquired Dec. Dec. 2005 2006 2006 2006 2005 2006 2006 $ 4,989.1 $ 5,163.3 $ 5,433.8 $ 8,328.4 $ $ 4,590.3 $ Balance at beginning of period 8,171.6 5,163.3 Deferral 263.0 244.5 391.6 424.3 937.6 517.9 1,578.5 Amortization (144.8) (165.0) (222.2) (225.9) (540.7) (278.5) (891.7) Included in Total Benefits and Expenses 118.2 79.6 169.4 198.4 396.9 239.5 686.8 Adjustment related to realized (gains) losses on available-for-sale securities (8.7) (10.9) (18.9) (8.9) (48.5) (8.9) (47.6) Adjustment related to unrealized (gains) losses on available-for-sale securities 84.7 194.2 221.5 (359.8) 313.1 (17.4) 38.4 Foreign currency translation adjustment (20.0) 7.7 48.3 9.7 (88.5) 35.7 101.5 Business acquired - - 2,474.2 3.8 - - 2,478.0 $ 5,163.3 $ 5,433.8 $ 8,328.4 $ 8,171.6 $ $ 5,163.3 $ Balance at end of period 8,420.4 8,420.4 (0.0) (0.0) 0.0 (0.1) Roll Forward of Deferred Front-End Load $ 786.9 $ 795.7 $ 805.8 $ 861.0 $ $ 814.2 $ Balance at beginning of period 923.9 795.7 Deferral 33.2 31.1 69.1 71.0 124.9 77.9 248.9 Amortization (15.0) (24.7) (37.4) (12.7) (99.6) (42.8) (117.6) Included in Expense Assessments 18.2 6.4 31.8 58.3 25.3 35.1 131.3 Adjustment related to realized (gains) losses on available-for-sale securities - - - (0.1) - - (0.1) Foreign currency translation adjustment (9.5) 3.8 23.6 4.7 (43.9) 17.9 49.9 $ 795.7 $ 805.8 $ 861.0 $ 923.9 $ $ 795.7 $ Balance at end of period 976.9 976.9 (0.0) (0.1) (0.0) Roll Forward of Deferred Sales Inducements $ 118.1 $ 129.4 $ 139.9 $ 154.6 $ $ 85.5 $ Balance at beginning of period 173.4 129.4 Deferral 15.6 15.7 19.9 22.2 59.5 28.4 86.1 Amortization (4.4) (5.2) (5.2) (3.3) (15.6) (7.9) (21.6) Included in Income from Operations 11.3 10.5 14.7 18.9 43.9 20.5 64.5 Adjustment related to realized (gains) losses on available-for-sale securities - - - (0.1) - - (0.1) $ 129.4 $ 139.9 $ 154.6 $ 173.4 $ $ 129.4 Balance at end of period 193.8 $ 193.8 2.84217E-14 -0.03736 $ - 0.0 0.1 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 8 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] For the Quarter Ended December 31, 2006 Individual Markets Employer Markets Lincoln Defined Executive Group Investment Financial Other Consolidating Life Annuities Contribution Benefits Protection Management Lincoln UK Media Operations Adjustments Consolidated Operating Revenue Premiums $ 93.5 $ 10.7 $ - $ 3.3 $ 315.9 $ - $ 21.0 $ - $ 3.8 $ - $ 448.1 Surrender charges 16.1 12.3 1.5 - - - - - - - 29.9 Mortality assessments 278.4 - - 8.5 - - 9.0 - - - 295.9 Expense assessments 116.4 215.2 58.4 5.5 - - 36.8 - - - 432.3 Investment advisory fees - - - - - 111.2 - - - (25.2) 86.1 Communications revenue - - - - - - - 70.0 (0.5) - 69.6 Net investment income 441.1 314.8 180.6 90.5 28.0 - 18.0 0.1 54.1 (1.0) 1,126.3 Amortization of deferred gain - - - - - - - - 18.8 - 18.8 Other revenue and fees 13.0 84.3 4.5 1.3 0.8 37.7 - - 5.8 (10.2) 137.2 Total Operating Revenue 958.4 637.3 245.0 109.1 344.8 148.9 84.8 70.2 82.0 (36.4) 2,644.2 - - (0.0) 0.0 (0.0) (0.0) - (0.0) - (0.0) - Operating Expenses Insurance benefits 249.1 11.7 - 39.7 224.0 - 30.4 - 7.3 - 562.2 Interest credited to contractholder funds 251.3 211.7 104.4 42.0 - - - - 37.1 - 646.5 Communications expenses - - - - - - - 36.9 - - 36.9 Operating and acquisition expenses 192.0 248.0 78.2 7.8 62.8 122.7 39.1 3.9 44.4 (35.9) 763.1 Taxes, licenses and fees 27.0 4.5 1.9 1.3 6.9 3.5 - 1.8 1.2 0.0 48.0 Interest - 0.1 - - - - - 0.4 64.8 (0.5) 64.8 Total Operating Expenses 719.4 476.0 184.6 90.8 293.6 126.2 69.5 43.0 154.9 (36.4) 2,121.6 (0.0) 0.0 0.0 (0.0) - 0.0 - - - - - Income (Loss) from Operations before Federal income taxes 239.1 161.4 60.4 18.3 51.2 22.7 15.3 27.2 (73.0) - 522.6 - - - - - - - - - 0.0 Federal income taxes 81.7 37.6 15.8 5.6 17.9 8.3 5.4 9.6 (34.5) - 147.3 Income from Operations $ 157.4 $ 123.8 $ 44.6 $ 12.7 $ 33.2 $ 14.4 $ 9.9 $ 17.5 $ (38.4) $ - $ 375.2 (0.0) 0.0 0.0 0.0 (0.0) (0.0) This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 9 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] For the Quarter Ended December 31, 2005 Individual Markets Employer Markets Lincoln Defined Executive Group Investment Financial Other Consolidating Life Annuities Contribution Benefits Protection Management Lincoln UK Media Operations Adjustments Consolidated Operating Revenue Premiums $ 57.7 $ 8.5 $ - $ 0.7 $ - $ - $ 15.4 $ - $ 0.1 $ - $ 82.4 Surrender charges 11.6 4.4 2.0 - - - - - - - 18.0 Mortality assessments 135.3 - - 2.5 - - 7.3 - - - 145.1 Expense assessments 58.8 155.5 51.7 6.1 - - 22.0 - - - 294.1 Investment advisory fees - - - - - 95.4 - - - (24.5) 70.9 Communications revenue - - - - - - - - - - - Net investment income 227.5 150.4 181.3 51.0 - - 17.8 - 41.5 (1.3) 668.2 Amortization of deferred gain - - - - - - - - 18.9 - 18.9 Other revenue and fees 10.3 53.3 6.2 1.3 - 32.5 - - 1.2 (7.1) 97.6 Total Operating Revenue 501.1 372.1 241.2 61.6 - 127.9 62.6 - 61.7 (32.9) 1,395.4 - - (0.0) (0.0) - - - - - - Operating Expenses Insurance benefits 118.6 21.2 - 31.2 - - 27.5 - (0.5) - 198.0 Interest credited to contractholder funds 142.1 96.3 101.1 9.5 - - - - 34.5 - 383.4 Communications expenses - - - - - - - - - - - Operating and acquisition expenses 117.3 166.1 76.0 6.3 - 111.9 14.3 - 9.7 (31.8) 469.7 Taxes, licenses and fees 12.9 (1.4) 1.2 1.0 - 2.6 - - 0.9 - 17.3 Interest - - - - - - - - 22.9 (1.0) 21.8 Total Operating Expenses 390.8 282.2 178.3 48.0 - 114.4 41.8 - 67.4 (32.8) 1,090.2 0.0 - - (0.0) - - - - - - - Income (Loss) from Operations before Federal income taxes 110.4 89.9 62.9 13.6 - 13.5 20.8 - (5.7) - 305.3 - - - - - - - - - - Federal income taxes 36.5 19.0 17.7 4.1 - 4.6 7.2 - (15.4) - 73.8 Income from Operations $ 73.8 $ 70.9 $ 45.2 $ 9.5 $ - $ 8.9 $ 13.6 $ - $ 9.6 $ - $ 231.4 (0.0) 0.0 0.1 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 10 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] Year Ended December 31, 2006 Individual Markets Employer Markets Lincoln Defined Executive Group Investment Financial Other Consolidating Life Annuities Contribution Benefits Protection Management Lincoln UK Media Operations Adjustments Consolidated Operating Revenue Premiums $ 321.5 $ 47.5 $ - $ 4.7 $ 949.0 $ - $ 78.6 $ - $ 5.3 $ - $ 1,406.5 Surrender charges 60.3 34.7 7.6 - - - - - - - 102.5 Mortality assessments 970.2 - - 27.0 - - 34.4 - - - 1,031.7 Expense assessments 350.0 755.4 222.6 18.1 - - 123.5 - 0.3 - 1,469.8 Investment advisory fees - - - - - 424.8 - - - (96.9) 327.9 Communications revenue - - - - - - - 187.4 (0.5) - 186.9 Net investment income 1,510.9 1,038.6 738.2 316.6 80.2 - 71.4 0.5 225.4 (1.0) 3,980.8 Amortization of deferred gain - - - - - - - - 75.0 - 75.0 Other revenue and fees 43.0 285.1 19.6 5.3 2.5 138.7 0.1 - 18.7 (29.8) 483.2 Total Operating Revenue 3,255.8 2,161.3 988.0 371.8 1,031.8 563.5 308.0 187.8 324.2 (127.8) 9,064.3 - - (0.0) - (0.0) (0.1) - (0.0) - 0.0 - Operating Expenses Insurance benefits 886.4 104.8 - 138.5 663.3 - 108.2 - 17.0 - 1,918.2 Interest credited to contractholder funds 882.1 683.8 410.5 131.4 - - - - 143.7 - 2,251.5 Communications expenses - - - - - - - 98.1 - - 98.1 Operating and acquisition expenses 643.2 849.6 288.4 27.4 193.6 465.5 140.0 15.7 84.6 (127.8) 2,580.2 Taxes, licenses and fees 99.1 19.4 9.0 5.0 22.6 13.4 - 3.2 7.4 - 179.2 Interest - 0.6 - - - - - 1.4 216.9 - 218.8 Total Operating Expenses 2,510.8 1,658.1 708.0 302.3 879.5 478.9 248.2 118.5 469.6 (127.8) 7,246.1 (0.0) - 0.0 (0.0) - - - - - - - Income (Loss) from Operations before Federal income taxes 745.0 503.2 280.0 69.4 152.3 84.5 59.8 69.4 (145.4) 0.0 1,818.2 - - - - - - - - - (0.0) - Federal income taxes 248.7 94.7 76.2 20.2 53.3 29.4 20.9 25.3 (69.5) - 499.3 Income from Operations $ 496.3 $ 408.5 $ 203.8 $ 49.2 $ 99.0 $ 55.1 $ 38.9 $ 44.0 $ (75.8) $ - $ 1,319.0 (0.0) 0.0 (0.0) (0.0) (0.0) 0.0 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 11 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] Year Ended December 31, 2005 Individual Markets Employer Markets Lincoln Defined Executive Group Investment Financial Other Consolidating Life Annuities Contribution Benefits Protection Management Lincoln UK Media Operations Adjustments Consolidated Operating Revenue Premiums $ 198.4 $ 37.1 $ - $ 8.6 $ - $ - $ 63.3 $ - $ 1.0 $ - $ 308.4 Surrender charges 43.9 19.9 9.9 (0.4) - - - - - - 73.3 Mortality assessments 524.6 - - 8.9 - - 34.8 - - - 568.3 Expense assessments 189.7 559.4 200.6 18.6 - - 141.6 - - - 1,110.0 Investment advisory fees - - - - - 354.6 - - - (98.8) 255.9 Communications revenue - - - - - - - - - - - Net investment income 908.7 613.8 711.5 186.7 - - 78.6 - 207.4 (4.2) 2,702.7 Amortization of deferred gain - - - - - - - - 75.7 - 75.7 Other revenue and fees 45.2 192.4 25.5 5.1 - 120.6 0.1 - 4.7 (10.7) 382.6 Total Operating Revenue 1,910.6 1,422.5 947.5 227.4 - 475.3 318.4 - 288.9 (113.8) 5,476.8 (0.0) - - (0.0) - - (0.1) - - - - Operating Expenses Insurance benefits 461.4 94.3 - 133.7 - - 116.0 - 0.1 - 805.5 Interest credited to contractholder funds 559.8 392.7 401.8 38.8 - - - - 133.0 - 1,526.3 Communications expenses - - - - - - - - - - - Operating and acquisition expenses 448.5 600.5 276.7 24.7 - 438.7 135.7 - 71.3 (110.6) 1,885.5 Taxes, licenses and fees 54.6 13.9 7.8 4.5 - 10.4 - - 4.2 - 95.5 Interest - - - - - - - - 90.5 (3.2) 87.2 Total Operating Expenses 1,524.3 1,101.3 686.3 201.7 - 449.0 251.8 - 299.1 (113.8) 4,400.0 (0.0) - - - 0.0 - - - (0.0) - - Income (Loss) from Operations before Federal income taxes 386.2 321.1 261.2 25.7 - 26.3 66.6 - (10.2) - 1,076.8 - - - - - - - - - - (0.0) Federal income taxes 126.7 69.1 74.1 6.1 - 9.5 23.3 - (64.5) - 244.2 Income from Operations $ 259.5 $ 252.0 $ 187.1 $ 19.6 $ - $ 16.8 $ 43.3 $ - $ 54.3 $ - $ 832.7 0.0 (0.0) 0.0 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 12 Consolidated Balance Sheet Unaudited [Millions of Dollars, except Common Share Data] Dec. March June Sept. Dec. 2005 2006 2006 2006 2006 ASSETS Investments Corporate bonds $ 25,860.7 $ 25,418.0 $ 43,881.6 $ 45,345.3 $ 45,489.4 U.S. government bonds 161.8 173.4 287.6 291.6 263.4 Foreign government bonds 1,203.3 1,169.7 1,188.0 1,144.4 1,141.6 Mortgage backed securities 5,951.2 5,868.8 8,370.3 8,765.1 8,691.3 State and municipal bonds 128.8 126.0 166.5 160.7 159.4 Preferred stocks - redeemable 137.4 136.9 130.1 117.8 108.3 Common stocks 55.9 61.0 458.8 506.3 525.5 Preferred stocks-equity 88.8 115.0 119.7 155.7 174.7 Total AFS Securities 33,587.9 33,068.8 54,602.6 56,486.9 56,553.7 Trading securities 3,246.0 3,190.1 3,109.0 3,172.5 3,036.3 Mortgage loans 3,662.6 3,586.2 7,741.2 7,580.5 7,384.3 Real estate 182.7 180.4 428.6 424.0 421.3 Policy loans 1,862.2 1,860.4 2,716.4 2,724.9 2,759.7 Other long-term investments 626.9 687.5 1,116.6 1,218.7 1,332.4 Total Investments 43,168.4 42,573.2 69,714.4 71,607.5 71,487.6 Cash and invested cash 2,311.7 1,974.0 1,499.8 1,108.3 1,620.6 Premiums and fees receivable 343.2 363.2 343.9 345.6 356.2 Accrued investment income 526.4 532.1 879.0 928.2 866.2 Amount recoverable from reinsurers 6,926.3 6,899.4 7,967.2 8,007.3 7,939.1 Deferred acquisition costs and VOBA 5,163.2 5,433.7 8,328.4 8,171.6 8,420.4 Goodwill 1,194.2 1,194.4 4,502.6 4,498.0 4,499.5 Other 1,479.3 1,517.7 3,049.6 2,703.1 2,770.4 Assets held in separate accounts 63,746.8 67,984.2 71,095.2 74,357.1 80,533.7 Total Assets $ 124,859.6 $ 128,472.0 $ 167,380.0 $ 171,726.6 $ 178,493.7 LIABILITIES and SHAREHOLDERS' EQUITY Liabilities Insurance and Investment Contract Liabilities: Reserves $ 10,659.7 $ 10,657.2 $ 13,512.1 $ 13,513.4 $ 13,622.1 Unpaid claims 1,042.9 981.3 1,211.7 1,206.9 1,149.1 Premium deposit funds 21,713.3 21,448.6 21,198.4 20,708.6 20,541.4 Policyholders' funds 13,878.8 13,991.5 37,430.3 37,808.3 38,275.1 Total Insurance and Investment Contract Liabilities 47,294.8 47,078.6 73,352.5 73,237.2 73,587.7 - - - Short-term debt 119.9 10.6 561.0 559.2 657.6 Long-term debt - senior notes 999.0 998.5 2,329.1 2,330.4 2,231.0 Long-term debt - subordinated Capital securities - - 1,071.8 1,071.9 1,072.0 Junior subordinated debentures issued to affiliated trusts 334.0 332.3 330.5 332.5 154.6 Embedded derivative - modco 292.2 192.0 126.7 232.5 228.7 Deferred gain on indemnity reinsurance 836.0 816.9 797.8 778.7 759.6 Federal income taxes 19.8 - 563.8 911.1 977.9 Other liabilities 4,832.8 4,720.7 5,746.7 5,872.8 6,089.9 Liabilities related to separate accounts 63,746.8 67,984.2 71,095.2 74,357.1 80,533.7 Total Liabilities 118,475.2 122,133.8 155,975.2 159,683.5 166,292.7 Preferred Stock 0.5 0.5 0.5 0.5 0.5 Capital stock 1,774.6 1,817.5 7,425.7 7,448.7 7,450.7 Retained earnings 4,081.5 4,235.2 4,013.7 3,986.7 4,136.7 Unrealized gains on investments 496.6 220.2 (151.5) 478.0 469.6 Gains - derivatives 7.3 35.2 51.5 55.9 62.4 Foreign currency 83.4 89.7 128.5 136.5 165.1 Minimum pension liability (59.5) (60.1) (63.6) (63.2) - Adjustment to initially apply SFAS 158 - - - - (84.0) Total Shareholders' Equity 6,384.4 6,338.2 11,404.8 12,043.2 12,201.0 0.0 0.0 0.0 Total Liabilities and Shareholders' Equity $ 124,859.6 $ 128,472.0 $ 167,380.0 $ 171,726.6 $ 178,493.7 (0.0) (0.0) (0.0) Shareholders' Equity Per Share $ 36.69 $ 35.99 $ 40.48 $ 43.39 $ 44.21 Book Value, Excluding AOCI $ 33.66 $ 34.37 $ 40.60 $ 41.20 $ 41.99 Common shares outstanding -assuming conv of preferreds (in millions) 174.0 176.1 281.8 277.6 276.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 13 Balance Sheet Data - Segment Highlights Unaudited [Millions of Dollars] Individual Employer Markets Markets Lincoln Other Defined Executive Group Investment Financial (1) Annuities Life Contribution Benefits Protection Management Media Operations Consolidated Lincoln UK As of December 31, 2006 Assets Allocated Investments $ 18,686.2 $ 27,843.9 $ 11,762.6 $ 6,088.9 $ 1,833.6 $ - $ 1,101.1 $ - $ 4,171.4 $ 71,487.6 DAC and VOBA 2,050.4 4,659.4 497.6 265.3 137.6 - 809.0 - 1.3 8,420.4 Goodwill 1,031.6 2,181.3 20.2 - 281.0 261.7 16.2 707.6 - 4,499.5 Other intangibles 193.7 97.0 0.1 - - 9.3 - 663.1 - 963.2 Amounts recoverable from reinsurers 836.9 1,817.7 - 5.3 27.5 - 70.2 - 5,181.5 7,939.1 Assets held in separate accounts 48,014.7 5,040.3 17,459.2 833.4 - - 8,756.9 - 429.3 80,533.7 Liabilities and Capital Insurance and Investment Contract Liabilities: Insurance policy & claim reserves 438.1 5,640.7 - 1,778.3 1,183.4 - 1,118.8 - 4,611.8 14,771.2 Contractholder funds 18,206.0 23,433.9 10,982.9 4,025.5 16.8 - 435.6 - 1,715.9 58,816.5 Total Insurance and Inv Contract Liabilities 18,644.1 29,074.6 10,982.9 5,803.8 1,200.2 - 1,554.4 - 6,327.7 73,587.7 - - (0.0) - - - - - - - (2) Allocated capital 3,432.5 7,345.1 959.8 531.7 923.1 307.8 385.0 876.6 (3,173.6) $ 11,587.9 As of December 31, 2005 Assets Allocated Investments $ 8,104.7 $ 14,990.3 $ 13,666.6 $ 2,879.4 $ - $ - $ 996.6 $ - $ 2,530.8 $ 43,168.4 DAC and VOBA 1,328.0 2,543.9 454.9 113.6 - - 743.4 - (20.7) 5,163.2 Goodwill 43.9 855.1 20.2 - - 260.8 14.3 - - 1,194.2 Other intangibles 129.4 - - - - 13.9 - - - 143.3 Amounts recoverable from reinsurers 1,085.9 1,270.2 - 2.8 - - 59.9 - 4,507.5 6,926.3 Assets held in separate accounts 37,903.9 2,482.7 15,243.9 796.7 - - 7,319.6 - - 63,746.8 Liabilities and Capital Insurance and Investment Contract Liabilities: Insurance policy & claim reserves 439.6 3,561.2 - 1,914.9 - - 1,013.7 - 4,773.2 11,702.7 Contractholder funds 8,619.8 12,868.0 11,033.4 752.4 - - 396.4 - 1,922.1 35,592.1 Total Insurance and Inv Contract Liabilities 9,059.4 16,429.2 11,033.4 2,667.3 - - 1,410.1 - 6,695.4 47,294.8 (2) Allocated capital 1,785.0 3,231.9 978.7 346.0 - 360.0 430.6 - (1,275.6) $ 5,856.6 (1) Includes consolidating adjustments. (2) Allocated capital is based on internal economic capital models plus certain other items (principally intangibles including DAC and VOBA, goodwill and other items). This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 14 Individual Markets - Individual Life Insurance Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Premiums $ 57.7 $ 51.1 $ 89.9 $ 87.0 62.0% $ 198.4 62.0% $ 93.5 $ 321.5 Surrender charges 11.6 10.3 15.5 18.3 38.8% 43.9 37.4% 16.1 60.3 Mortality assessments 135.3 135.6 277.3 278.9 105.8% 524.6 84.9% 278.4 970.2 Expense assessments 58.8 54.3 93.0 86.1 98.0% 189.7 84.5% 116.4 350.0 Net investment income 227.5 239.5 415.9 414.4 93.9% 908.7 66.3% 441.1 1,510.9 Other revenue and fees 10.3 9.7 9.7 10.6 26.2% 45.2 -4.9% 13.0 43.0 Total Operating Revenue 501.1 500.6 901.4 895.3 91.3% 1,910.6 70.4% 958.4 3,255.8 - - - - Operating Expenses Insurance benefits 118.6 120.2 256.0 261.1 110.0% 461.4 92.1% 249.1 886.4 Interest credited to contractholder funds 142.1 142.2 241.5 247.1 76.8% 559.8 57.6% 251.3 882.1 Operating and acquisition expenses 130.1 132.8 182.9 207.6 68.3% 503.1 47.5% 219.0 742.3 Total Operating Expenses 390.8 395.3 680.4 715.7 84.1% 1,524.3 64.7% 719.4 2,510.8 - 0.0 - Income from operations before Federal income taxes 110.4 105.3 221.0 179.6 116.6% 386.2 92.9% 239.1 745.0 (0.0) 0.0 0.0 - (0.0) Federal income taxes 36.5 36.3 73.9 56.8 123.8% 126.7 96.3% 81.7 248.7 Income from Operations $ 73.8 $ 69.0 $ 147.1 $ 122.8 113.3% $ 259.5 91.3% $ 157.4 $ 496.3 - - - - Effective tax rate 33.1% 34.5% 33.4% 31.6% 32.8% 34.2% 33.4% Average equity $ 3,278.0 $ 3,266.0 $ 7,051.8 $ 7,223.9 $ $ 3,206.5 $ 7,292.7 6,208.6 Return on average equity 9.0% 8.5% 8.3% 6.8% 8.1% 8.6% 8.0% Operating and Acquisition Expenses Commissions $ 82.2 $ 66.8 $ 151.2 $ 167.1 $ 175.7% $ 266.9 $ 129.1% 226.5 611.6 General and administrative expenses 73.8 66.3 97.2 122.5 57.7% 296.9 35.5% 116.3 402.3 Taxes, licenses and fees 12.9 16.3 27.5 28.3 109.8% 54.6 81.5% 27.0 99.1 Total commissions and expenses incurred 168.7 149.4 275.9 317.9 119.1% 618.3 80.0% 369.8 1,113.0 Less: commissions and expenses capitalized (113.8) (90.1) (199.8) (226.6) NM (373.8) NM (291.3) (807.8) Amortization of DAC and VOBA 75.2 73.6 106.7 116.3 86.8% 258.7 68.9% 140.5 437.0 $ 130.1 $ 132.8 $ 182.9 $ 207.6 $ 68.3% $ 503.1 $ 47.5% Net Operating and Acquisition Expenses 219.0 742.3 - - - (0.0) - 0.1 - General and administrative expenses - 212 187 153 191 (34) 219 (43) basis points on account values - Annualized 178 176 Roll Forward of Deferred Acquisition Costs & Value of Business Acquired $ 2,479.9 $ 2,543.9 $ 2,643.8 $ 4,592.2 $ $ 2,359.0 $ Balance at beginning of period 4,524.7 2,543.9 Deferral 113.8 90.1 199.8 226.6 373.8 291.3 807.8 Amortization (75.2) (73.6) (106.7) (116.3) (258.7) (140.5) (437.0) Included in Total Operating Expenses 38.6 16.6 93.0 110.3 115.1 150.8 370.8 Adjustment related to realized (gains) losses on available-for-sale securities (1.2) (3.4) (7.9) (3.8) (15.4) (6.7) (21.8) Adjustment related to unrealized (gains) losses on available-for-sale securities 26.5 86.7 96.7 (174.0) 85.0 (9.5) (0.1) Business acquired - - 1,766.6 - - - 1,766.6 Other 0.1 - - - 0.1 - - $ 2,543.9 $ 2,643.8 $ 4,592.2 $ 4,524.7 $ $ 2,543.9 $ Balance at end of period 4,659.4 4,659.4 (0.0) (0.1) 0.0 (0.0) (0.1) (0.0) (0.0) Roll Forward of Deferred Front-End Loads $ 338.5 $ 342.6 $ 344.3 $ 375.3 $ $ 311.1 $ Balance at beginning of period 415.9 342.6 Deferral 21.8 19.7 57.8 58.9 81.0 65.2 201.6 Amortization (17.6) (18.0) (26.8) (18.3) (49.5) (31.6) (94.7) Included in Expense Assessments 4.2 1.7 31.0 40.6 31.5 33.6 106.9 $ 342.6 $ 344.3 $ 375.3 $ 415.9 $ $ 342.6 $ Balance at end of period 449.5 449.5 0.0 - - 0.0 - - 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 15 Individual Markets- Individual Life Insurance Operational Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Sales by Product (Millions) (1) Universal Life Excluding MoneyGuard $ 59.6 $ 41.3 $ 97.5 $ 119.9 198.0% $ 191.7 127.5% $ 177.6 $ 436.2 MoneyGuard 9.4 7.7 7.5 8.3 -17.0% 33.9 -7.7% 7.8 31.3 Total 69.0 49.0 105.0 128.2 168.7% 225.6 107.2% 185.4 467.5 Variable universal life 13.4 10.0 15.7 13.0 64.9% 42.2 44.1% 22.1 60.8 Whole life 0.4 0.7 0.4 0.7 50.0% 1.8 27.8% 0.6 2.3 Term 7.9 8.2 11.3 10.7 26.6% 33.7 19.3% 10.0 40.2 Total $ 90.7 $ 67.9 $ 132.3 $ 152.5 140.5% $ 303.2 88.3% $ 218.1 $ 570.8 First-Year Paid Premiums (Millions) Universal Life Excluding MoneyGuard $ 144.0 $ 108.2 $ 261.2 $ 269.0 143.8% $ 436.3 126.8% $ 351.0 $ 989.4 MoneyGuard 62.5 51.5 50.0 54.8 -16.3% 226.1 -7.7% 52.3 208.6 Total 206.5 159.7 311.2 323.9 95.3% 662.4 80.9% 403.2 1,198.1 Variable universal life 33.4 27.1 40.5 34.4 59.9% 106.5 45.9% 53.4 155.4 Whole life 14.4 8.3 9.5 12.0 14.6% 40.7 13.8% 16.5 46.3 Term 8.4 8.6 11.5 10.4 14.3% 35.9 11.4% 9.6 40.0 Total $ 262.7 $ 203.7 $ 372.7 $ 380.6 83.7% $ 845.5 70.3% $ 482.7 $ 1,439.8 Life Insurance In-Force (Billions) Universal life & other $ 128.791 $ 129.584 $ 260.945 $ 263.485 107.5% $ 128.791 107.5% $ 267.228 $ 267.228 Term insurance 187.850 191.825 229.082 232.214 24.6% 187.850 24.6% 234.148 234.148 Total Life Segment In-Force $ 316.641 $ 321.409 $ 490.027 $ 495.699 58.3% $ 316.641 58.3% $ 501.376 $ 501.376 - (1) Sales for Individual Life Insurance consist of first year commissionable premium for Universal life (quot;ULquot;), including Moneyguard, including UL internal replacements, and first year paid premiums for Whole life and Term products. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 16 Individual Markets - Individual Life Insurance Account Value Roll Forward Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 2006 Change 2005 2006 Change $ 11.591 $ 11.809 $ 11.913 $ 21.285 $ 85.6% $ 11.232 $ 5.1% Interest Sensitive Life-Balance Beginning-of-Period 21.516 11.809 Business acquired - - 9.150 - NM - NM - 9.150 Deposits 0.499 0.401 0.799 0.717 90.0% 1.685 70.0% 0.948 2.865 Withdrawals & deaths (0.160) (0.182) (0.317) (0.275) -88.1% (0.675) -59.3% (0.301) (1.075) Net flows 0.339 0.219 0.482 0.442 90.9% 1.010 77.2% 0.647 1.790 Policyholder assessments (0.257) (0.250) (0.493) (0.451) NM (0.976) -75.9% (0.523) (1.717) Interest credited 0.136 0.135 0.233 0.241 83.1% 0.543 58.0% 0.249 0.858 (1) Interest Sensitive Life-Balance End-of-Period $ 11.809 $ 11.913 $ 21.285 $ 21.516 $ 85.4% $ 11.809 $ 85.4% 21.890 21.890 - - - 0.000 (0.000) - 0.000 $ 2.154 $ 2.242 $ 2.355 $ 4.194 $ 99.9% $ 2.028 $ 10.6% Variable Universal Life-Balance Beginning of Period 4.305 2.242 Business acquired - - 1.918 - NM - NM - 1.918 Deposits 0.097 0.087 0.224 0.036 57.7% 0.346 44.2% 0.153 0.499 Withdrawals & deaths (0.036) (0.049) (0.158) 0.013 NM (0.161) -65.8% (0.073) (0.267) Net flows 0.061 0.038 0.066 0.049 31.1% 0.185 25.9% 0.080 0.233 Policyholder assessments (0.044) (0.044) (0.077) (0.076) -79.5% (0.171) -61.4% (0.079) (0.276) Investment income and change in market value 0.071 0.119 (0.068) 0.137 NM 0.200 141.5% 0.294 0.483 Variable Universal Life -Balance End-of-Period $ 2.242 $ 2.355 $ 4.194 $ 4.305 $ 4.600 105.2% $ 2.242 $ 4.600 105.2% - - (0.000) 0.000 - (0.000) (0.000) Total Segment- Life Insurance Account Value Roll Forward $ 13.745 $ 14.051 $ 14.268 $ 25.479 $ 87.9% $ 13.259 $ 6.0% Balance Beginning-of-Period 25.821 14.051 Business acquired - - 11.068 - NM - NM - 11.068 Deposits 0.596 0.488 1.023 0.753 84.7% 2.030 65.8% 1.101 3.365 Withdrawals & deaths (0.196) (0.231) (0.476) (0.262) -90.8% (0.836) -60.5% (0.374) (1.342) Net flows 0.400 0.257 0.548 0.491 81.8% 1.195 69.3% 0.727 2.023 Policyholder assessments (0.301) (0.294) (0.571) (0.526) -100.0% (1.147) -73.7% (0.602) (1.992) Investment income and change in market value 0.206 0.254 0.165 0.379 163.6% 0.743 80.5% 0.543 1.341 Total Segment -Balance End-of-Period $ 14.051 $ 14.268 $ 25.479 $ 25.821 $ 26.490 88.5% $ 14.051 $ 26.490 88.5% - - - 0.000 (0.000) - 0.000 Life Product Spread Information (2) Change Change Interest Sensitive Products (Basis Points) (Basis Points) Net investment income (3) (4) 6.26% 6.48% 6.22% 6.08% 18 6.33% (4) 6.44% 6.29% Interest credited to policyholders 4.66% 4.60% 4.46% 4.52% (14) 4.68% (16) 4.52% 4.52% Spread (3)(4) 1.60% 1.88% 1.76% 1.57% 32 1.65% 12 1.92% 1.77% Traditional Products Net investment income (3) 6.42% 6.72% 6.59% 6.60% 9 6.55% 5 6.51% 6.60% (1) Includes universal life, interest sensitive life, and the fixed investment option of VUL products. (2) Interest Sensitive Products - For the life products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited on life products divided by average fixed account values. Traditional Products - the yield on earning assets is calculated as net investment income on traditional investment portfolios divided by average earning assets. As of December 31, 2006, interest sensitive products represented approximately 81% of total interest sensitive and traditional earning assets. (3) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread for interest sensitive products was 12 bps in the 4th quarter of 2006, 20 bps in the 3rd quarter of 2006, 13 bps in the 2nd quarter of 2006, 7 bps in the 1st quarter of 2006 and 8 bps in the 4th quarter of 2005. The impact was 14 basis points for the full year 2006 and 6 basis points for the full year 2005. There was an impact on traditional products of 2 bps in the 4th quarter of 2006, 15 bps in the 3rd quarter of 2006, 14 bps in the 2nd quarter of 2006, 15 bps in the 1st quarter of 2006 and 0 bps in the 4th quarter of 2005. The impact was 12 basis points for the full year 2006 and 10 basis points for the full year 2005. (4) The net investment income and spread for the fourth, third, second and first quarters of 2006 include 24 bps, -22 bps, 2 bps and 17 bps, respectively, of incremental yield from special investments. The impact was 4 bps for the full year 2006 and 2 bps for the full year 2005. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 17 Individual Markets - Individual Annuities Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Premiums $ 8.5 $ 9.3 $ 15.3 $ 12.3 25.9% $ 37.1 28.0% $ 10.7 $ 47.5 Surrender charges 4.4 6.2 9.6 6.6 179.5% 19.9 74.7% 12.3 34.7 Expense assessments 155.5 168.0 182.7 189.3 38.4% 559.4 35.0% 215.2 755.4 Net investment income 150.4 148.0 263.2 312.7 109.3% 613.8 69.2% 314.8 1,038.6 Other revenue and fees (1) 53.3 43.4 81.8 75.7 58.2% 192.4 48.2% 84.3 285.1 Total Operating Revenue 372.1 374.8 552.6 596.5 71.3% 1,422.5 51.9% 637.3 2,161.3 (0.0) (0.0) - (0.0) Operating Expenses Insurance benefits 21.2 20.4 45.3 27.4 -44.8% 94.3 11.1% 11.7 104.8 Interest credited to contractholder funds 96.3 95.1 168.8 208.2 119.8% 392.7 74.1% 211.7 683.8 Operating and acquisition expenses 164.7 172.6 216.9 227.3 53.4% 614.3 41.5% 252.6 869.5 Total Operating Expenses 282.2 288.1 431.0 462.9 68.7% 1,101.3 50.6% 476.0 1,658.1 - - - - 0.0 - 0.0 Income from operations before Federal income taxes 89.9 86.7 121.5 133.6 79.5% 321.1 56.7% 161.4 503.2 0.0 - 0.0 - 0.0 Federal income taxes 19.0 20.3 32.5 4.2 97.9% 69.1 37.0% 37.6 94.7 Income from Operations $ 70.9 $ 66.4 $ 89.0 $ 129.4 74.6% $ 252.0 62.1% $ 123.8 $ 408.5 0.0 0.0 - - Effective tax rate 21.1% 23.4% 26.7% 3.1% 21.5% 23.3% 18.8% Average equity $ 1,773.7 $ 1,744.1 $ 3,269.2 $ 3,310.4 $ 1,714.1 $ 3,388.1 $ 2,927.9 Return on average equity 16.0% 15.2% 10.9% 15.6% 14.7% 14.6% 14.0% Income from Operations - basis points on average account values 60 52 58 84 57 76 69 Operating and Acquisition Expenses Commissions $ 100.4 $ 111.3 $ 140.5 $ 146.2 66.5% $ 383.8 47.2% $ 167.2 $ 565.1 General and administrative expenses 70.9 66.2 69.8 81.8 14.1% 271.5 10.0% 80.9 298.8 Broker-dealer commissions and general and administrative expenses 54.2 46.6 79.3 76.6 47.6% 204.3 38.3% 80.0 282.5 Taxes, licenses and fees (1.4) 5.4 4.6 4.8 NM 13.9 39.6% 4.5 19.4 Total commissions and expenses incurred 224.1 229.5 294.2 309.4 48.4% 873.5 33.5% 332.6 1,165.7 Less: commissions and expenses capitalized (118.9) (122.7) (150.0) (157.6) -52.9% (441.9) -38.5% (181.8) (612.0) Amortization of DAC and VOBA 59.5 65.8 72.7 75.6 70.9% 182.7 72.9% 101.7 315.8 $ 164.7 $ 172.6 $ 216.9 $ 227.3 53.4% $ 614.3 41.5% Net Operating and Acquisition Expenses $ 252.6 $ 869.5 1E-06 $ 0.0 - 0.1 - General and administrative expenses - basis points on gross account values - Annualized (2) 60 52 45 53 (10) 61 (11) 50 50 Roll Forward of Deferred Acquisition Costs & Value of Business Acquired $ 1,250.6 $ 1,328.0 $ 1,414.9 $ 1,994.4 $ $ 999.4 $ Balance at beginning of period 1,974.1 1,328.0 Deferral 118.9 122.7 150.0 157.6 441.9 181.8 612.0 Amortization (59.5) (65.8) (72.7) (75.6) (182.7) (101.7) (315.8) Included in Total Operating Expenses 59.4 56.9 77.3 82.0 259.3 80.0 296.2 Adjustment related to realized (gains) losses on available-for-sale securities (3.5) (2.7) (4.1) (2.4) (17.1) (1.1) (10.4) Adjustment related to unrealized (gains) losses on available-for-sale securities 21.5 32.7 57.3 (103.6) 86.5 (2.7) (16.2) Business acquired - - 448.9 3.8 - - 452.7 $ 1,328.0 $ 1,414.9 $ 1,994.4 $ 1,974.1 $ $ 1,328.0 Balance at end of period 2,050.4 $ 2,050.4 0.1 0.0 (0.0) (0.0) 0.1 0.0 (0.1) Roll Forward of Deferred Front-End Loads $ 65.6 $ 72.0 $ 78.1 $ 84.8 $ $ 50.1 $ Balance at beginning of period 94.6 72.0 Deferral 9.5 9.4 9.8 10.0 35.8 10.6 39.7 Amortization (3.1) (3.3) (3.0) (0.1) (13.8) (4.3) (10.7) Included in Income from Operations 6.4 6.1 6.8 9.8 22.0 6.3 29.0 Adjustment related to realized (gains) losses on available-for-sale securities - - - (0.1) - - (0.1) $ 72.0 $ 78.1 $ 84.8 $ 94.6 $ $ 72.0 Balance at end of period 100.9 $ 100.9 0.1 - - (0.0) 0.1 0.1 0.0 Roll Forward of Deferred Sales Inducements $ 118.1 $ 129.4 $ 139.9 $ 154.6 $ $ 85.5 $ Balance at beginning of period 173.4 129.4 Deferral 15.6 15.7 19.9 22.2 59.5 28.2 86.0 Amortization (4.4) (5.2) (5.2) (3.3) (15.6) (7.9) (21.6) Included in Income from Operations 11.3 10.5 14.7 18.9 43.9 20.3 64.4 Adjustment related to realized (gains) losses on available-for-sale securities - - - (0.1) - - (0.1) $ 129.4 $ 139.9 $ 154.6 $ 173.4 $ $ 129.4 Balance at end of period 193.7 $ 193.7 -0.03736 $ $ - 0.1 $ 0.0 (1) Primarily broker-dealer revenue. (2) Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 18 Individual Markets - Individual Annuities Account Value Roll Forward Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Fixed Annuities - Balance at Beginning of Period $ 11.375 $ 10.840 $ 10.563 $ 19.533 66.5% $ 11.448 -5.3% $ 18.939 $ 10.840 Business acquired - - 9.343 - NM - NM - 9.343 Gross deposits 0.486 0.471 0.872 1.062 126.3% 1.987 76.4% 1.100 3.505 Withdrawals & deaths (0.370) (0.408) (1.037) (1.405) NM (1.410) NM (1.162) (4.011) Net flows 0.116 0.063 (0.164) (0.344) NM 0.577 NM (0.062) (0.506) Transfer from (to) variable annuities (0.766) (0.451) (0.395) (0.483) 26.8% (1.650) -14.6% (0.561) (1.891) Interest credited 0.115 0.112 0.186 0.233 99.1% 0.464 63.8% 0.229 0.760 Fixed Annuities - Gross 10.840 10.563 19.533 18.939 71.1% 10.840 71.1% 18.545 18.545 Reinsurance ceded (2.233) (2.202) (2.149) (2.045) 18.9% (2.233) 18.9% (1.812) (1.812) (1) Fixed Annuities - Balance at End of Period $ 8.607 $ 8.362 $ 17.384 $ 16.894 $ 94.4% $ 8.607 $ 94.4% 16.733 16.733 Variable Annuities - Balance at Beginning of Period $ 35.276 $ 37.655 $ 40.495 $ 41.537 24.7% $ 30.684 22.7% $ 43.977 $ 37.655 Business acquired - - 0.250 - NM - NM - 0.250 Gross deposits 1.513 1.665 1.867 1.658 36.2% 5.539 30.9% 2.061 7.251 Withdrawals & deaths (0.862) (0.959) (1.004) (1.011) -28.4% (3.240) -25.9% (1.107) (4.080) Net flows 0.651 0.706 0.864 0.648 46.5% 2.299 37.9% 0.954 3.171 Transfer from (to) fixed annuities 0.462 0.451 0.395 0.483 21.2% 1.649 14.6% 0.560 1.890 Investment increase & change in market value 1.266 1.682 (0.467) 1.309 111.5% 3.024 72.1% 2.678 5.203 (2) Variable Annuities - Balance at End of Period $ 37.655 $ 40.495 $ 41.537 $ 43.977 $ 27.9% $ 37.655 $ 27.9% 48.169 48.169 - - - (0.000) (0.000) (0.000) (0.001) Total Annuities - Balance at Beginning of Period $ 46.651 $ 48.495 $ 51.059 $ 61.070 34.9% $ 42.132 15.1% $ 62.916 $ 48.495 Business acquired - - 9.593 - NM - NM - 9.593 Gross deposits 1.999 2.136 2.740 2.720 58.1% 7.526 42.9% 3.161 10.756 Withdrawals & deaths (1.232) (1.366) (2.040) (2.416) -84.2% (4.650) -74.0% (2.269) (8.091) Net flows 0.767 0.770 0.699 0.304 16.3% 2.876 -7.3% 0.892 2.665 Transfers (0.304) - 0.000 0.000 99.7% (0.001) 0.0% (0.001) (0.001) Interest credited & change in market value 1.381 1.794 (0.281) 1.542 110.5% 3.488 70.9% 2.907 5.962 Total Annuities - Gross 48.495 51.059 61.070 62.916 37.6% 48.495 37.6% 66.714 66.714 Reinsurance ceded (2.233) (2.202) (2.149) (2.045) 18.9% (2.233) 18.9% (1.812) (1.812) Total Annuities (Net of Ceded) - Balance at End of Period $ 46.262 $ 48.857 $ 58.921 $ 60.872 $ 40.3% $ 46.262 $ 40.3% 64.902 64.902 Variable Annuities Under Agreement - Included above $ 0.197 $ 0.190 $ 0.173 $ 0.169 -13.7% $ 0.197 -13.7% $ 0.170 $ 0.170 Incremental Deposits (3) : Fixed annuities $ 0.472 $ 0.461 $ 0.861 $ 1.058 130.1% $ 1.931 $ 79.5% $ 1.086 3.466 Variable annuities 1.481 1.650 1.850 1.623 37.5% 5.416 32.2% 2.036 7.159 Total Incremental Deposits $ 1.953 $ 2.111 $ 2.711 $ 2.681 59.9% $ 7.346 $ 44.6% $ 3.122 10.625 $0.000 $ $ - - Note: The withdrawals, net flows and ending account values for the second quarter of 2006 have been adjusted by $145 million to correct the amounts previously reported. Certain reclassifications have been made to properly distinguish between Fixed and Variable products. These changes did not have any impact on the income from operations of the segment or LFG. (1) Includes fixed portion of variable annuities. (2) Excludes the fixed portion of variable annuities. (3) Incremental Deposits represent gross deposits reduced by transfers from other Lincoln products. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 19 Individual Markets - Individual Annuities Account Values Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Fixed Annuities - excluding fixed portion of variable contracts Deposits $ 0.006 $ 0.021 $ 0.137 $ 0.258 $ NM $ 0.117 $ NM 0.280 0.697 Withdrawals (0.183) (0.243) (0.805) (1.148) NM (0.777) NM (0.943) (3.140) Net flows $ (0.177) $ (0.222) $ (0.668) $ (0.890) $ NM $ (0.660) $ NM (0.663) (2.443) $ - Gross fixed contract account values $ 6.918 $ 6.745 $ 12.190 $ 11.766 $ 62.2% $ 6.918 $ 62.2% 11.221 11.221 Reinsurance ceded (2.233) (2.202) (2.149) (2.045) 18.9% (2.233) 18.9% (1.812) (1.812) Net Fixed Contract Account Values $ 4.685 $ 4.543 $ 10.041 $ 9.721 $ 100.8% $ 4.685 $ 100.8% 9.409 9.409 $ - $ - Indexed Annuities Deposits $ - $ - $ 0.228 $ 0.244 $ NM $ - NM 0.245 $ 0.717 Withdrawals - - (0.047) (0.068) NM - NM (0.061) (0.175) Net flows $ - $ - $ 0.181 $ 0.177 $ NM $ - NM 0.184 $ 0.542 Equity-indexed Contract Account Values $ - $ - $ 3.210 $ 3.454 NM $ - NM $ 3.711 $ 3.711 Fixed Portion of Variable Contracts Deposits $ 0.480 $ 0.449 $ 0.507 $ 0.559 $ 19.8% $ 1.870 $ 11.8% 0.575 2.090 Withdrawals (0.187) (0.164) (0.185) (0.190) 15.5% (0.632) -10.3% (0.158) (0.697) Net flows $ 0.293 $ 0.285 $ 0.322 $ 0.370 $ 42.3% $ 1.238 $ 12.6% 0.417 1.394 Fixed Portion of Variable Contract Account Values $ 3.922 $ 3.819 $ 4.132 $ 3.719 -7.9% $ 3.922 -7.9% $ 3.613 $ 3.613 Variable Annuities - including fixed portion of variable contracts Deposits $ 1.993 $ 2.114 $ 2.374 $ 2.218 $ 32.2% $ 7.409 $ 26.1% 2.635 9.342 Withdrawals (1.049) (1.123) (1.188) (1.200) -20.6% (3.872) -23.4% (1.265) (4.777) Net Flows $ 0.945 $ 0.991 $ 1.186 $ 1.017 $ 45.1% $ 3.536 $ 29.1% 1.371 4.565 Variable Contract Account Values $ 41.577 $ 44.314 $ 45.669 $ 47.697 24.5% $ 41.577 24.5% $ 51.782 $ 51.782 Average Daily Variable Annuity Account Values $ 36.089 $ 39.947 $ 41.214 $ 42.342 28.9% $ 33.255 27.8% $ 46.514 $ 42.504 Change Change Individual Annuity Product Spread Information (Basis Point) (Basis Point) (1) (2) (3) Net investment income 5.73% 5.84% 5.67% 5.89% 14 5.74% 6 5.87% 5.80% (4) Interest credited to policyholders 3.92% 3.93% 3.81% 3.81% (15) 3.94% (12) 3.77% 3.82% (1) (2) (3) (4) Spread 1.81% 1.91% 1.86% 2.08% 29 1.80% 18 2.10% 1.98% $ - $ - $ - Note: The withdrawals, net flows and ending account values for the second quarter of 2006 have been adjusted by $145 million to correct the amounts previously reported. Certain reclassifications have been made to properly distinguish between Fixed and Variable products. These changes did not have any impact on the income from operations of the segment or LFG. (1) For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited on annuity products less bonus credits and excess DCA interest, divided by average fixed account values net of co-insured account values. Fixed account values reinsured under modified co-insurance agreements are included in account values for this calculation since assets (and therefore margin) are retained under these agreements. (2) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread was 10 bps in the fourth quarter of 2006, 7 bps in the third quarter of 2006, 2 bps in the second quarter of 2006, 9 bps in the first quarter of 2006 and 6 bps in the fourth quarter of 2005. The impact was 7 bps for the full year 2006 and 4 bps for the full year 2005. (3) Prior period spreads for 2006 and 2005 have been updated to exclude the impact of the SFAS 133 adjustment on the Indexed Annuity business. (4) The third quarter 2006 spreads have been updated to reflect a reclassification of surrender charges within interest credited. No income statement changes were made as a result of this reclassification because the impact was immaterial. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 20 Employer Markets - Defined Contribution Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Surrender charges $ 2.0 $ 2.3 $ 2.1 $ 1.7 -25.0% $ 9.9 -23.2% $ 1.5 $ 7.6 Expense assessments 51.7 55.6 54.7 54.0 13.0% 200.6 11.0% 58.4 222.6 Net investment income 181.3 185.7 187.5 184.6 -0.4% 711.5 3.8% 180.6 738.2 Other revenue and fees 6.2 5.6 4.6 4.9 -27.4% 25.5 -23.1% 4.5 19.6 Total Operating Revenue 241.2 249.2 248.9 245.1 1.6% 947.5 4.3% 245.0 988.0 - - 0.0 (0.0) - Operating Expenses Interest credited to contractholder funds 101.1 100.7 102.4 103.1 3.3% 401.8 2.2% 104.4 410.5 Operating and acquisition expenses 77.2 73.3 69.5 74.5 3.9% 284.5 4.5% 80.2 297.4 Total Operating Expenses 178.3 174.0 171.9 177.6 3.5% 686.3 3.2% 184.6 708.0 - (0.0) (0.0) 0.0 (0.0) Income from operations before Federal income taxes 62.9 75.2 77.0 67.5 -4.0% 261.2 7.2% 60.4 280.0 0.0 0.0 - - Federal income taxes 17.7 22.7 22.7 15.0 -10.7% 74.1 2.8% 15.8 76.2 Income from Operations $ 45.2 $ 52.5 $ 54.3 $ 52.5 -1.3% $ 187.1 8.9% $ 44.6 $ 203.8 0.0 - 0.0 0.0 0.0 Effective tax rate 28.2% 30.2% 29.4% 22.3% 28.4% 26.2% 27.2% Average equity $ 939.1 $ 1,006.4 $ 985.3 $ 945.7 $ 905.5 $ 954.9 $ 973.1 Return on average equity 19.3% 20.9% 22.0% 22.2% 20.7% 18.7% 20.9% Income from Operations - basis points on average account values 60 67 69 66 65 54 64 Operating and Acquisition Expenses Commissions $ 25.1 $ 26.2 $ 22.2 $ 23.4 $ -17.1% $ 102.9 $ -10.1% 20.8 92.5 General and administrative expenses 57.4 49.7 47.2 56.4 -1.6% 215.6 -2.7% 56.5 209.8 Taxes, licenses and fees 1.2 2.9 2.8 1.3 NM 7.8 15.4% 1.9 9.0 Total commissions and expenses incurred 83.7 78.8 72.3 81.1 -5.4% 326.2 -4.6% 79.2 311.3 Less: commissions and expenses capitalized (24.4) (25.5) (22.6) (21.5) 24.2% (97.3) 9.5% (18.5) (88.1) Amortization of DAC and VOBA 17.9 20.0 19.8 14.9 8.4% 55.6 33.3% 19.4 74.1 $ 77.2 $ 73.3 $ 69.5 $ 74.5 3.9% $ 284.5 4.5% Net Operating and Acquisition Expenses $ 80.2 $ 297.4 0.1 (0.1) - - - - - General and administrative expenses - basis (1) 77 64 60 71 (9) 75 (9) points on account values - Annualized 68 66 Roll Forward of Deferred Acquisition Costs & Value of Business Acquired $ 420.1 $ 454.9 $ 517.2 $ 564.0 $ $ 304.1 $ Balance at beginning of period 503.8 454.9 Deferral 24.4 25.5 22.6 21.5 97.3 18.5 88.1 Amortization (17.9) (20.0) (19.8) (14.9) (55.6) (19.4) (74.1) Included in Total Operating Expenses 6.6 5.5 2.7 6.6 41.8 (0.9) 13.9 Adjustment related to realized (gains) losses on available-for-sale securities (3.9) (4.4) (6.1) (2.0) (16.8) (0.2) (12.8) Adjustment related to unrealized (gains) losses on available-for-sale securities 32.1 61.2 50.2 (64.8) 125.8 (5.1) 41.5 Business acquired - - - - - - - Other - - - - - - - $ 454.9 $ 517.2 $ 564.0 $ 503.8 $ $ 454.9 $ Balance at end of period 497.6 497.6 -0.03652222 3.6E-07 -0.000491 0.0117738 $ (0.0) - 0.0 0.1 (0.0) - - - 0.1 - (1) Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 21 Employer Markets - Defined Contribution Account Value Roll Forward Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Fixed Annuities - Balance at Beginning of Period $ 10.686 $ 11.009 $ 11.033 $ 11.050 $ 3.5% $ 10.837 $ 1.6% 11.061 11.009 (1) Gross deposits 0.240 0.253 0.242 0.268 -23.8% 1.083 -12.6% 0.183 0.946 Withdrawals & deaths (0.342) (0.328) (0.345) (0.426) 0.6% (1.463) 1.6% (0.340) (1.439) Net flows (0.103) (0.075) (0.103) (0.159) -52.4% (0.380) -29.9% (0.157) (0.493) Transfer from (to) variable annuities 0.318 0.014 0.030 0.049 NM 0.143 NM (0.011) 0.082 Interest credited 0.108 0.085 0.090 0.121 3.7% 0.408 - 0.112 0.408 (2) Fixed Annuities - Balance at End of Period $ 11.009 $ 11.033 $ 11.050 $ 11.061 $ - $ 11.009 $ - 11.006 11.006 Variable Annuities - Balance at Beginning of Period $ 15.293 $ 15.692 $ 16.454 $ 16.144 $ 8.1% $ 14.576 $ 7.7% 16.530 15.692 (1) Gross deposits 0.616 0.669 0.714 0.583 -9.3% 2.254 12.0% 0.559 2.525 Withdrawals & deaths (0.553) (0.676) (0.647) (0.565) -21.0% (2.110) -21.2% (0.669) (2.557) Net flows 0.062 (0.006) 0.067 0.018 NM 0.144 NM (0.110) (0.032) Transfer from (to) fixed annuities (0.011) (0.015) (0.032) (0.046) 172.7% (0.132) 36.1% 0.008 (0.084) Investment increase & change in market value 0.348 0.783 (0.345) 0.414 200.9% 1.104 71.9% 1.047 1.899 (3) Variable Annuities - Balance at End of Period $ 15.692 $ 16.454 $ 16.144 $ 16.530 $ 11.4% $ 15.692 $ 11.4% 17.475 17.475 Total Annuities - Balance at Beginning of Period $ 25.979 $ 26.701 $ 27.487 $ 27.194 6.2% $ 25.413 5.1% $ 27.591 $ 26.701 (1) Gross Deposits 0.856 0.923 0.955 0.851 -13.3% 3.337 4.0% 0.742 3.471 Withdrawals & deaths (0.896) (1.004) (0.992) (0.992) -12.6% (3.573) -11.8% (1.009) (3.996) Net flows (0.040) (0.081) (0.036) (0.141) NM (0.236) NM (0.267) (0.525) Transfers 0.306 (0.001) (0.002) 0.003 NM 0.011 NM (0.002) (0.002) Interest credited & change in market value 0.456 0.867 (0.255) 0.535 154.4% 1.513 52.5% 1.160 2.307 Total Annuities - Balance at End of Period $ 26.701 $ 27.487 $ 27.194 $ 27.591 6.7% $ 26.701 6.7% $ 28.482 $ 28.482 - - - (0.000) - Alliance Mutual Funds - Balance at Beginning of Period $ 3.672 $ 3.772 $ 4.248 $ 4.330 26.3% $ 2.861 31.8% $ 4.636 $ 3.772 Plan/Participant Rollovers 0.063 0.125 0.021 0.057 166.7% 0.422 -12.2% 0.168 0.371 Additional contributions 0.160 0.193 0.183 0.178 18.1% 0.644 15.4% 0.189 0.743 Gross deposits 0.223 0.318 0.204 0.235 60.1% 1.066 4.5% 0.357 1.113 Withdrawals & deaths (0.208) (0.056) (0.054) (0.057) 62.0% (0.410) 39.8% (0.079) (0.247) Net flows 0.014 0.262 0.150 0.178 NM 0.656 32.2% 0.277 0.866 Transfers (0.003) 0.005 - (0.015) 200.0% (0.007) NM 0.003 (0.007) Interest credited & change in market value 0.088 0.209 (0.068) 0.143 194.3% 0.262 107.2% 0.259 0.543 (4) Total Alliance Mutual Funds - Balance at End of Period $ 3.772 $ 4.248 $ 4.330 $ 4.636 37.2% $ 3.772 37.2% $ 5.175 $ 5.175 - - - - - - Total Defined Contribution Segment Account Values- including Alliance Mutual Funds Balance at Beginning of Period $ 29.651 $ 30.473 $ 31.735 $ 31.524 $ 8.7% $ 28.274 $ 7.8% 32.227 30.473 (1) Gross deposits 1.078 1.241 1.159 1.086 1.9% 4.403 4.1% 1.099 4.585 Withdrawals & deaths (1.104) (1.060) (1.045) (1.049) 1.4% (3.983) -6.5% (1.089) (4.243) Net flows (0.026) 0.181 0.114 0.037 138.5% 0.419 -18.6% 0.010 0.342 Transfers 0.304 0.005 (0.002) (0.012) -100.0% 0.005 NM 0.000 (0.009) Interest credited & change in market value 0.544 1.077 (0.322) 0.677 160.8% 1.775 60.6% 1.419 2.850 Total Defined Contribution Segment Account Values- Balance at End of Period $ 30.473 $ 31.735 $ 31.524 $ 32.227 $ 10.4% $ 30.473 10.4% 33.656 $ 33.656 - - (0.000) (0.000) - Variable Annuities Under Agreement - Included above 0.019 0.018 0.017 0.017 -10.5% 0.019 -10.5% 0.017 0.017 (5) Incremental Deposits : Fixed Annuities $ 0.200 $ 0.254 $ 0.226 $ 0.253 -13.5% $ 1.020 -11.3% $ 0.173 $ 0.905 Variable Annuities 0.614 0.654 0.709 0.576 -10.3% 2.245 10.9% 0.551 2.490 Total Annuities Incremental Deposits 0.814 0.908 0.935 0.829 -11.1% 3.265 4.0% 0.724 3.395 Total Alliance Mutual Funds Incremental Deposits 0.223 0.318 0.204 0.235 60.1% 1.066 4.5% 0.357 1.114 Total Defined Contribution Incremental Deposits $ 1.036 $ 1.226 $ 1.139 $ 1.064 4.2% $ 4.331 4.1% $ 1.080 $ 4.509 $0.000 $0.000 $0.000 Note: Certain reclassifications have been made to properly distinguish between Fixed and Variable products. (1) Gross deposits for the second quarter and full year 2006 include approximately $20 million and $110 million of fixed and variable annuity deposits, respectively, resulting from JP employee plan deposits into the LNC employee plan as a result of the merger. (2) Includes Fixed Annuity products offered under the Alliance mutual funds and the fixed portion of variable annuities. (3) Excludes the fixed portion of variable annuities. (4) Represents amounts attributable to Alliance mutual fund net flows. Alliance mutual fund account values are not included in the separate accounts reported on our balance sheet. (5) Incremental Deposits represent gross deposits reduced by transfers from other Lincoln products. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • PAGE 22 12/31/2006 Employer Markets - Defined Contribution Supplemental Data Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. Dec. % Dec. Dec. % 2005 2006 2006 2006 2006 Change 2005 2006 Change Fixed Annuities - excluding fixed portion of variable contracts Deposits (1) $ 0.152 $ 0.135 $ 0.121 $ 0.157 $ -38.8% $ 0.563 $ -10.1% 0.093 0.506 Withdrawals (0.190) (0.108) (0.114) (0.162) (0.118) 37.9% (0.679) (0.501) 26.2% Net Flows $ (0.039) $ 0.027 $ 0.008 $ (0.005) $ 38.5% $ (0.116) $ NM (0.024) 0.005 Fixed Contract Account Values $ 4.654 $ 4.690 $ 4.717 $ 4.758 $ 4.797 3.1% $ 4.654 $ 4.797 3.1% Fixed Portion of Variable Contracts Deposits $ 0.088 $ 0.118 $ 0.120 $ 0.111 $ 0.090 2.3% $ 0.520 $ 0.440 -15.4% Withdrawals (0.152) (0.220) (0.231) (0.265) (0.222) -46.1% (0.784) (0.938) -19.6% Net Flows $ (0.064) $ (0.102) $ (0.111) $ (0.154) $ NM $ (0.264) $ -89.0% (0.132) (0.499) Fixed Portion of Variable Contract Account Values $ 6.355 $ 6.343 $ 6.333 $ 6.303 $ 6.210 -2.3% $ 6.355 $ 6.210 -2.3% Variable Annuities - including fixed portion of variable contracts Deposits (1) $ 0.704 $ 0.788 $ 0.834 $ 0.694 $ -7.8% $ 2.774 $ 6.9% 0.649 2.965 Withdrawals (0.705) (0.896) (0.878) (0.830) (0.891) -26.4% (2.894) (3.495) -20.8% Net Flows $ (0.002) $ (0.108) $ (0.044) $ (0.136) $ NM $ (0.121) $ NM (0.242) (0.530) Variable Contract Account Values $ 22.047 $ 22.797 $ 22.477 $ 22.833 $ 23.685 7.4% $ 22.047 $ 23.685 7.4% Average Daily Variable Annuity Account Values $ 15.323 $ 16.177 $ 16.270 $ 16.116 $ 17.164 12.0% $ 14.782 $ 16.432 11.2% Total Annuity based Retirement Plan Product Spread Information (2) Change Change (Basis Point) (Basis Point) Net investment income (3) 6.36% 6.34% 6.31% 6.39% (13) 6.29% 3 6.23% 6.32% Interest credited to policyholders 3.67% 3.66% 3.73% 3.76% 3.79% 12 3.69% 3.73% 4 Spread (3) 2.69% 2.68% 2.58% 2.63% (25) 2.60% (1) 2.44% 2.59% Note: Certain reclassifications have been made to properly distinguish between Fixed and Variable products. (1) Gross deposits for the second quarter and full year 2006 include approximately $20 million and $110 million of fixed and variable annuity deposits, respectively, resulting from JP employee plan deposits into the LNC employee plan as a result of the merger. (2) For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited on annuity products less bonus credits and excess DCA interest, divided by average fixed account values. (3) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread was 4 bps in the 4th quarter of 2006, 13 bps in the 3rd quarter of 2006, 12 bps in the 2nd quarter of 2006, 15 bps in the 1st quarter of 2006 and 17 bps in the 4th quarter of 2005. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 23 Employer Markets - Executive Benefits Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Premiums $ 0.7 $ 1.1 $ 0.0 $ 0.3 NM $ 8.6 $ -45.3% $ 3.3 4.7 Surrender charges 0.0 0.0 0.0 0.0 NM (0.4) NM 0.0 0.0 Mortality assessments 2.5 2.8 8.5 7.2 240.0% 8.9 203.4% 8.5 27.0 Expense assessments 6.1 3.3 4.9 4.5 -9.8% 18.6 -2.7% 5.5 18.1 Net investment income 51.0 48.7 86.5 91.0 77.5% 186.7 69.6% 90.5 316.6 Other revenue and fees 1.3 1.4 1.3 1.3 5.1 3.9% 1.3 5.3 Total Operating Revenue 61.6 57.2 101.2 104.3 77.1% 227.4 63.5% 109.1 371.8 - - - - - Operating Expenses Insurance benefits 31.2 32.8 30.4 35.6 27.2% 133.7 3.6% 39.7 138.5 Interest credited to contractholder funds 9.5 9.3 40.2 39.9 NM 38.8 238.7% 42.0 131.4 Operating and acquisition expenses 7.3 4.6 7.2 11.7 24.7% 29.2 11.3% 9.1 32.5 Total Operating Expenses 48.0 46.7 77.7 87.2 89.2% 201.7 49.9% 90.8 302.3 - - - - - Income from operations before Federal income taxes 13.6 10.5 23.5 17.1 34.6% 25.7 170.0% 18.3 69.4 - - 0.0 - - Federal income taxes 4.1 3.0 7.3 4.3 36.6% 6.1 231.1% 5.6 20.2 Income from Operations $ 9.5 $ 7.5 $ 16.2 $ 12.8 33.7% $ 19.6 151.0% $ 12.7 $ 49.2 - - - - - Effective tax rate 30.0% 28.5% 31.0% 25.2% 23.6% 30.7% 29.1% Average equity $ 321.8 $ 334.5 $ 524.8 $ 519.8 $ 297.7 $ 528.2 $ 476.8 Return on average equity 11.8% 9.0% 12.4% 9.8% 6.6% 9.6% 10.3% Operating and Acquisition Expenses Commissions $ 5.1 $ 5.1 $ 8.1 $ 7.1 $ 119.6% $ 22.0 $ 43.2% 11.2 31.5 General and administrative expenses 5.0 3.7 2.8 6.2 -4.0% 19.0 -7.9% 4.8 17.5 Taxes, licenses and fees 1.0 1.1 1.3 1.4 30.0% 4.5 11.1% 1.3 5.0 Total commissions and expenses incurred 11.1 9.9 12.2 14.6 55.9% 45.4 18.9% 17.3 54.0 Less: commissions and expenses capitalized (5.1) (5.7) (8.0) (6.7) NM (23.1) -35.9% (10.9) (31.4) Amortization of DAC and VOBA 1.3 0.3 2.9 3.8 115.4% 6.9 42.0% 2.8 9.8 $ 7.3 $ 4.5 $ 7.2 $ 11.7 24.7% $ 29.2 11.3% Net Operating and Acquisition Expenses $ 9.1 $ 32.5 - 0.1 - - - - - General and administrative expenses - basis points on account values - Annualized (1) 49 36 16 36 (22) 47 (19) 27 28 Roll Forward of Deferred Acquisition Costs & Value of Business Acquired $ 109.8 $ 113.6 $ 119.0 $ 274.1 $ $ 97.3 $ Balance at beginning of period 258.0 113.6 Deferral 5.1 5.7 8.0 6.7 23.1 10.9 31.4 Amortization (1.3) (0.3) (2.9) (3.8) (6.9) (2.8) (9.8) Included in Total Operating Expenses 3.8 5.4 5.1 2.9 16.2 8.2 21.6 Adjustment related to realized (gains) losses on available-for-sale securities - - - (0.7) (0.8) - (1.5) Adjustment related to unrealized (gains) losses on available-for-sale securities - - 7.6 (18.3) (0.1) - (10.9) Business acquired - - 142.5 - - - 142.5 Other - - - - (0.0) - - $ 113.6 $ 119.0 $ 274.1 $ 258.0 $ $ 113.6 $ Balance at end of period 265.3 265.3 0.0 0.0 0.0 0.0 (0.0) 0.0 (0.0) Roll Forward of Deferred Front-End Loads $ 16.9 $ 17.9 $ 18.9 $ 19.7 $ $ 15.5 $ Balance at beginning of period 20.3 17.9 Deferral 1.2 1.0 1.0 0.9 3.9 1.5 4.4 Amortization (0.3) (0.0) (0.2) (0.3) (1.5) (0.2) (0.7) Included in Income from Operations 0.9 1.0 0.8 0.6 2.4 1.4 3.8 $ 17.9 $ 18.9 $ 19.7 $ 20.3 $ $ 17.9 $ Balance at end of period 21.7 21.7 0.0 - - - 0.0 - - (1) Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 24 Employer Markets - Executive Benefits Account Value Roll Forward and Supplemental Data Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 $ 1.256 $ 1.318 $ 1.387 $ 4.228 $ 238.5% $ 1.122 $ 17.5% COLI/BOLI- Balance Beginning-of-Period 4.252 1.318 Business acquired - - 2.795 - NM - NM - 2.795 Deposits 0.052 0.047 0.077 0.058 63.5% 0.209 27.8% 0.085 0.267 Withdrawals & deaths (0.002) (0.007) (0.042) (0.069) NM (0.048) NM (0.092) (0.210) Net flows 0.049 0.039 0.035 (0.011) NM 0.161 -64.6% (0.007) 0.057 Policyholder assessments (0.011) (0.009) (0.017) (0.016) -72.7% (0.035) -71.4% (0.019) (0.060) Interest credited and change in market value 0.023 0.038 0.028 0.051 243.5% 0.070 180.0% 0.079 0.196 COLI/BOLI-Balance End-of-Period $ 1.318 $ 1.387 $ 4.228 $ 4.252 $ 226.6% $ 1.318 $ 226.6% 4.305 4.305 - - - 0.000 0.000 - 0.000 COLI/BOLI In-Force $ 7.729 $ 7.979 $ 15.373 $ 15.342 102.4% $ 7.729 102.4% $ 15.645 $ 15.645 Run Off Institutional Pensions Account Values - Balance at End of Period $ 2.737 $ 2.753 $ 2.707 $ 2.711 -0.6% $ 2.737 -0.6% $ 2.720 $ 2.720 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 25 Employer Markets - Group Protection Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Premiums $ - $ - $ 328.9 $ 304.1 NM $ - NM $ 315.9 $ 949.0 Net investment income - - 25.1 27.1 NM - NM 28.0 80.2 Other revenue and fees - - 0.8 0.9 NM - NM 0.8 2.5 Total Operating Revenue - - 354.9 332.1 NM - NM 344.8 1,031.8 (0.0) (0.0) (0.0) Operating Expenses Insurance benefits - - 226.0 213.3 NM - NM 224.0 663.3 Operating and acquisition expenses - - 72.0 74.6 NM - NM 69.6 216.2 Total Operating Expenses - - 297.9 287.9 NM - NM 293.6 879.5 - (0.0) 0.0 - Income from operations before Federal income taxes - - 56.9 44.2 NM - NM 51.2 152.3 - - 0.0 (0.0) Federal income taxes - - 19.9 15.5 NM - NM 17.9 53.3 Income from Operations $ - $ - $ 37.0 $ 28.8 NM $ - NM $ 33.2 $ 99.0 - - Effective tax rate 35.0% 35.0% 35.0% 35.0% Average equity $ 861.0 $ 896.8 $ 913.4 $ 890.4 Return on average equity 17.2% 12.8% 14.6% 14.8% Operating and Acquisition Expenses Commissions $ - $ - $ 37.3 $ 36.0 $ NM $ - NM 36.8 $ 110.1 General and administrative expenses - - 31.9 35.5 NM - NM 37.5 104.8 Taxes, licenses and fees - - 8.0 7.8 NM - NM 6.9 22.6 Total commissions and expenses incurred - - 77.1 79.3 NM - NM 81.2 237.6 Less commissions and expenses capitalized - - (11.2) (11.3) NM - NM (14.8) (37.2) Amortization of DAC and VOBA - - 6.0 6.6 NM - NM 3.2 15.9 $ - $ - $ 72.0 $ 74.6 NM $ - NM Net Operating and Acquisition Expenses $ 69.6 $ 216.2 - - General and administrative expenses as a - - 9.7% 11.7% NM - NM percentage of premiums 11.9% 11.0% Roll Forward of Deferred Acquisition Costs & Value of Business Acquired $ - $ - $ - $ 121.4 $ $ - Balance at beginning of period 126.1 $ - Deferral - - 11.2 11.3 - 14.8 37.2 Amortization - - (6.0) (6.6) - (3.2) (15.9) Included in Total Operating Expenses - - 5.2 4.7 - 11.5 21.4 Adjustment related to realized (gains) losses on available-for-sale securities - - - - - - - Adjustment related to unrealized (gains) losses on available-for-sale securities - - - - - - - Business acquired - - 116.2 - - - 116.2 Other - - - - - - - $ - $ - $ 121.4 $ 126.1 $ - Balance at end of period $ 137.6 $ 137.6 - 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 26 Employer Markets - Group Protection Supplemental Data Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Annualized Sales Life $ - $ - $ 15.3 $ 19.4 NM $ - NM $ 43.1 $ 77.8 Disability - - 22.9 24.7 NM - NM 56.9 104.5 Dental - - 7.1 6.1 NM - NM 13.1 26.4 Premiums: Life $ - $ - $ 111.6 $ 109.9 NM $ - NM $ 112.5 $ 334.0 Disability - - 134.0 134.8 NM - NM 138.5 407.2 Dental - - 31.4 31.7 NM - NM 31.8 94.9 Other - - 51.9 27.8 NM - NM 33.2 112.8 Total $ - $ - $ 328.9 $ 304.1 NM $ - NM $ 315.9 $ 949.0 (0.046) 0.0 Product Line Results: Life $ - $ - $ 13.5 $ 9.8 NM $ - NM $ 13.6 $ 36.9 Disability - - 21.1 16.1 NM - NM 15.5 52.7 Dental - - 1.4 2.2 NM - NM 3.0 6.6 Other - - 1.0 0.7 NM - NM 1.1 2.8 Total $ - $ - $ 37.0 $ 28.8 NM $ - NM $ 33.2 $ 99.0 0.018 0.0 Loss Ratios: Life - - 67.8% 72.3% NM - NM 69.0% 69.7% Disability - - 59.4% 64.5% NM - NM 69.3% 64.4% Dental - - 76.3% 71.7% NM - NM 68.7% 72.2% Combined loss ratios - - 64.7% 68.4% NM - NM 69.1% 67.4% This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 27 Investment Management Income Statements Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 2006 Change 2005 2006 Change Operating Revenue Investment advisory fees - External $ 70.9 $ 77.8 $ 81.2 $ 82.4 22.0% $ 255.8 28.1% $ 86.5 $ 327.8 Investment advisory fees - Insurance-related 24.5 25.1 23.5 23.7 0.8% 98.8 -1.8% 24.7 97.0 Other revenue and fees 32.5 36.7 30.0 34.3 16.0% 120.6 15.0% 37.7 138.7 Operating Revenue 127.9 139.6 134.7 140.4 16.4% 475.3 18.6% 148.9 563.5 - - - (0.1) - Operating Expenses Operating and administrative expenses 114.4 116.1 116.4 120.3 10.3% 449.0 6.7% 126.2 478.9 Total Operating Expenses 114.4 116.1 116.4 120.3 10.3% 449.0 6.7% 126.2 478.9 - - - - - Income (Loss) from operations before Federal income taxes 13.5 23.5 18.3 20.1 68.1% 26.3 221.3% 22.7 84.5 (0.0) - - (0.0) Federal income taxes 4.6 8.2 6.3 6.7 80.4% 9.5 209.5% 8.3 29.4 Income (Loss) from Operations $ 8.9 $ 15.3 $ 12.0 $ 13.4 $ 14.4 61.8% $ 16.8 $ 55.1 228.0% - - - - - Effective tax rate 34.1% 34.9% 34.4% 33.1% 36.1% 36.5% 34.8% (1) Pre-tax Operating Margin 10.6% 16.8% 13.6% 14.3% 5.5% 15.2% 15.0% (2) After-tax Operating Margin 7.0% 11.0% 8.9% 9.6% 3.5% 9.7% 9.8% Operating and Acquisition Expenses General and administrative expenses $ 97.8 $ 96.1 $ 99.4 $ 104.2 11.6% $ 384.9 6.2% $ 109.1 $ 408.8 Depreciation and amortization 2.0 2.2 2.4 2.2 20.0% 8.7 6.9% 2.4 9.3 Sub-advisory fees 10.1 11.0 10.6 9.8 -3.0% 37.3 10.5% 9.8 41.2 Total general and administrative expenses 109.9 109.3 112.4 116.2 10.4% 430.9 6.6% 121.3 459.2 Taxes, licenses and fees 2.6 4.8 2.4 2.7 34.6% 10.4 28.8% 3.5 13.4 Amortization of intangibles 2.0 2.0 1.6 1.4 -30.0% 7.8 -19.2% 1.4 6.3 Total expenses incurred $ 114.4 $ 116.1 $ 116.4 $ 120.3 $ 126.2 10.3% $ 449.0 $ 478.9 6.7% - - - - - - (1) Pre-tax operating margin is calculated as Income (Loss) from Operations before Federal income taxes divided by Operating Revenue. (2) After-tax operating margin is calculated as Income (Loss) from Operations divided by Operating Revenue. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 28 Investment Management Assets Under Management Roll Forward Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 $ 9.371 $ 9.625 $ 9.761 $ 10.007 $ 12.3% $ 8.457 13.8% Retail Fixed - Balance-Beginning-of-Period 10.522 $ 9.625 Sales (1) 0.965 0.951 1.034 0.981 13.1% 3.718 9.1% 1.091 4.057 Redemptions (0.779) (0.805) (0.824) (0.810) -10.3% (2.764) -19.3% (0.859) (3.298) Transfers 0.026 (0.056) 0.030 0.012 7.7% 0.011 27.3% 0.028 0.014 Net Flows 0.212 0.089 0.240 0.183 23.1% 0.965 -19.9% 0.261 0.773 Net investment gains and change in market value 0.043 0.046 0.007 0.332 NM 0.203 193.1% 0.211 0.595 Balance at End-of-Period $ 9.625 $ 9.761 $ 10.007 $ 10.522 $ 14.2% $ 9.625 14.2% 10.993 $ 10.993 0.000 (0.000) - 0.000 (0.000) $ 30.988 $ 32.732 $ 36.500 $ 36.035 $ 19.3% $ 24.278 34.8% Retail Equity - Balance-Beginning-of-Period 36.954 $ 32.732 Sales (1) 2.664 3.069 2.249 1.516 -21.1% 11.383 -21.5% 2.101 8.935 Redemptions (1.700) (1.840) (2.134) (1.984) -45.4% (5.707) -47.7% (2.472) (8.430) Transfers (0.027) (0.013) (0.032) (0.016) -11.1% (0.198) 54.0% (0.030) (0.091) Net Flows 0.936 1.216 0.082 (0.483) NM 5.477 -92.4% (0.401) 0.414 Net investment gains and change in market value 0.807 2.552 (0.547) 1.402 280.9% 2.977 117.7% 3.074 6.481 Balance at End-of-Period $ 32.732 $ 36.500 $ 36.035 $ 36.954 $ 21.1% $ 32.732 21.1% 39.627 $ 39.627 (0.000) (0.000) - (0.000) (0.000) $ 40.359 $ 42.357 $ 46.261 $ 46.042 $ 17.6% $ 32.735 29.4% Total Retail - Balance-Beginning-of-Period 47.476 $ 42.357 Retail sales-Annuities 0.713 0.885 0.869 0.960 30.7% 2.768 31.8% 0.932 3.647 Retail sales-Mutual Funds 1.657 1.329 1.370 1.151 6.7% 5.994 -6.3% 1.768 5.617 Retail sales-Managed Accounts & Other 1.260 1.806 1.043 0.386 -60.9% 6.339 -41.2% 0.493 3.728 Total Retail Sales 3.629 4.019 3.282 2.497 -12.0% 15.101 -14.0% 3.192 12.991 Redemptions (2.479) (2.645) (2.959) (2.794) -34.3% (8.472) -38.4% (3.330) (11.728) Transfers (0.002) (0.069) (0.002) (0.003) (0.187) 58.8% (0.002) (0.077) Net Flows 1.148 1.305 0.322 (0.300) NM 6.442 -81.6% (0.140) 1.187 Net investment gains and change in market value 0.850 2.598 (0.540) 1.733 286.5% 3.180 122.5% 3.285 7.077 Balance at End-of-Period $ 42.357 $ 46.261 $ 46.042 $ 47.476 $ 19.5% $ 42.357 19.5% 50.620 $ 50.620 (0.000) (0.000) - (0.000) (0.000) $ 13.964 $ 14.699 $ 17.262 $ 18.154 $ 38.8% $ 11.547 27.3% Institutional Fixed - Balance-Beginning-of-Period 19.387 $ 14.699 Inflows (1) 1.175 3.080 1.634 1.133 210.1% 5.214 82.0% 3.644 9.490 Withdrawals/terminations (0.483) (0.447) (0.750) (0.516) -0.8% (2.209) 0.4% (0.487) (2.200) Transfers (0.001) 0.002 0.008 (0.002) NM (0.006) NM 0.001 0.010 Net Flows 0.691 2.636 0.892 0.615 NM 2.998 143.5% 3.157 7.300 Net investment gains and change in market value 0.044 (0.074) 0.001 0.618 NM 0.154 NM 0.297 0.842 Balance at End-of-Period $ 14.699 $ 17.262 $ 18.154 $ 19.387 $ 55.4% $ 14.699 55.4% 22.841 $ 22.841 0.000 0.000 - 0.000 0.000 $ 18.951 $ 20.576 $ 22.906 $ 21.729 $ 19.5% $ 12.849 60.1% Institutional Equity - Balance-Beginning-of-Period 22.649 $ 20.576 Inflows (1) 3.658 1.964 1.130 1.274 -66.0% 11.089 -49.4% 1.244 5.612 Withdrawals/terminations (2.617) (1.008) (1.327) (0.844) 33.7% (5.167) 4.9% (1.734) (4.913) Transfers 0.001 0.000 (0.008) 0.001 NM (0.142) 95.1% (0.001) (0.007) Net Flows 1.041 0.956 (0.205) 0.431 NM 5.780 -88.0% (0.490) 0.691 Net investment gains and change in market value 0.584 1.373 (0.971) 0.489 188.9% 1.948 32.3% 1.687 2.578 Balance at End-of-Period $ 20.576 $ 22.906 $ 21.729 $ 22.649 $ 15.9% $ 20.576 15.9% 23.845 $ 23.845 (0.000) (0.000) (0.000) - (0.000) (0.000) $ 32.915 $ 35.276 $ 40.167 $ 39.883 $ 27.7% $ 24.396 44.6% Total Institutional - Balance-Beginning-of-Period 42.035 $ 35.276 Inflows 4.833 5.044 2.764 2.406 1.1% 16.302 -7.4% 4.888 15.102 Withdrawals/terminations (3.100) (1.454) (2.078) (1.360) 28.4% (7.376) 3.6% (2.221) (7.113) Transfers (0.001) 0.003 0.000 (0.000) 100.0% (0.148) NM (0.000) 0.002 Net Flows 1.733 3.592 0.687 1.046 53.8% 8.778 -9.0% 2.666 7.991 Net investment gains and change in market value 0.629 1.299 (0.971) 1.107 215.4% 2.101 62.7% 1.984 3.419 Balance at End-of-Period $ 35.276 $ 40.167 $ 39.883 $ 42.035 $ 32.3% $ 35.276 32.3% 46.686 $ 46.686 (0.000) 0.000 (0.000) - 0.000 $ 77.633 $ 86.428 $ 85.926 $ 89.511 25.3% $ 77.633 25.3% Total Retail and Institutional - At End-of-Period $ 97.307 $ 97.307 (2) $ 43.086 $ 41.995 $ 65.637 $ 67.410 55.7% $ 43.086 55.7% General Account Assets-End-of-Period $ 67.066 $ 67.066 Total Assets Under Management $ 120.719 $ 128.423 $ 151.563 $ 156.921 36.2% $ 120.719 36.2% At End-of-Period $ 164.373 $ 164.373 $ 2.881 $ 4.898 $ 1.008 $ 0.745 -12.3% $ 15.220 -39.7% Total Retail and Institutional - Net Flows $ 2.526 $ 9.177 $ - Subadvised Assets, included in Assets Under Management above Retail $ 15.388 $ 17.320 $ 16.899 $ 16.421 17.1% $ 15.388 17.1% $ 18.023 $ 18.023 Institutional 5.114 5.608 4.593 4.560 -9.1% 5.114 -9.1% 4.648 4.648 $ 20.503 $ 22.928 $ 21.491 $ 20.982 10.6% $ 20.503 10.6% Total Subadvised Assets $ 22.671 $ 22.671 (1) Sales and in-flows include dividend reinvestments. (2) Balances reflect $26.1 billion of assets assumed as a result of the merger with Jefferson-Pilot on April 4, 2006. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 29 Lincoln UK Income Statements Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Premiums $ 15.4 $ 16.6 $ 19.9 $ 21.1 36.4% $ 63.3 24.2% $ 21.0 $ 78.6 Mortality assessments 7.3 7.8 8.9 8.7 23.3% 34.8 -1.1% 9.0 34.4 Expense assessments 22.0 28.0 34.7 23.9 67.3% 141.6 -12.8% 36.8 123.5 Net investment income 17.8 17.0 17.8 18.6 1.1% 78.6 -9.2% 18.0 71.4 Other revenue and fees - 0.1 - - NM 0.1 - - 0.1 Total Operating Revenue 62.6 69.5 81.4 72.3 35.5% 318.4 -3.3% 84.8 308.0 - (0.0) (0.0) - (0.0) Operating Expenses Insurance benefits 27.5 25.4 27.5 25.0 10.5% 116.0 -6.7% 30.4 108.2 Operating and acquisition expenses 14.3 27.6 38.9 34.5 173.4% 135.7 3.2% 39.1 140.0 Total Operating Expenses 41.8 53.0 66.3 59.5 66.3% 251.8 -1.4% 69.5 248.2 - - - (0.0) - Income from operations before Federal income taxes 20.8 16.5 15.1 12.8 -26.4% 66.6 -10.2% 15.3 59.8 - - - - (0.0) Federal income taxes 7.2 5.8 5.2 4.5 -25.0% 23.3 -10.3% 5.4 20.9 Income from Operations $ 13.6 $ 10.7 $ 9.9 $ 8.3 -27.2% $ 43.3 -10.2% $ 9.9 $ 38.9 - - - 0.0 - Effective tax rate on Income from Operations 34.7% 35.1% 34.4% 35.2% 35.3% 35.0% 34.9% Average equity $ 447.8 $ 427.0 $ 417.8 $ 406.0 $ 446.8 $ 392.3 $ 410.8 Return on average equity 12.1% 10.0% 9.5% 8.2% 9.7% 10.1% 9.5% Operating and Acquisition Expenses Commissions $ 0.1 $ 0.9 $ 1.1 $ 1.4 $ NM $ 2.3 $ 95.7% 1.1 4.5 General and administrative expenses 24.2 22.7 23.9 25.1 15.3% 98.3 1.2% 27.9 99.5 Total commissions and expenses incurred 24.3 23.6 25.0 26.4 19.3% 100.6 3.4% 29.0 104.0 Less: commissions and expenses capitalized (0.7) (0.5) (0.1) (0.6) (2.8) 32.1% (0.7) (1.9) Amortization of DAC and VOBA (9.3) 4.5 13.9 8.7 216.1% 37.9 10.8 37.9 NM $ 14.3 $ 27.6 $ 38.9 $ 34.5 173.4% $ 135.7 3.2% Net Operating and Acquisition Expenses $ 39.1 $ 140.0 Roll Forward of Deferred Acquisition Costs & Value of Business Acquired $ 753.5 $ 743.4 $ 747.2 $ 781.7 $ $ 867.0 $ Balance at beginning of period 783.4 743.4 Deferral 0.7 0.5 0.1 0.6 2.8 0.7 1.9 Amortization 9.3 (4.5) (13.9) (8.7) (37.9) (10.8) (37.9) Included in Total Benefits and Expenses 10.0 (4.0) (13.8) (8.0) (35.1) (10.1) (36.0) Foreign currency translation adjustment (20.0) 7.7 48.3 9.7 (88.5) 35.7 101.5 $ 743.4 $ 747.2 $ 781.7 $ 783.4 $ $ 743.4 $ Balance at end of period 809.0 809.0 - - - - - - (0.0) Roll Forward of Deferred Front-End Load $ 365.8 $ 363.1 $ 364.5 $ 381.2 $ 437.5 $ Balance at beginning of period $ 392.8 363.1 Deferral 0.7 1.0 0.5 0.8 4.2 0.6 3.0 Amortization 6.0 (3.4) (7.4) 6.1 (34.8) (6.8) (11.6) Included in Income from Operations 6.7 (2.4) (6.9) 6.9 (30.6) (6.2) (8.5) Foreign currency translation adjustment (9.5) 3.8 23.6 4.7 (43.9) 17.9 49.9 $ 363.1 $ 364.5 $ 381.2 $ 392.8 $ 363.1 $ Balance at end of period $ 404.5 404.5 - - 0.0 - - (0.0) 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 30 Lincoln UK Operational Data Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Unit Linked Assets $ 7.180 $ 7.320 $ 7.754 $ 7.857 13.1% $ 7.186 1.9% Balance-Beg-of-Period $ 8.118 $ 7.320 Deposits 0.156 0.069 0.073 0.105 -54.5% 0.389 -18.3% 0.071 0.318 Withdrawals (including charges) and Deaths (0.178) (0.186) (0.201) (0.218) -30.3% (0.728) -15.1% (0.232) (0.838) Net Flows (0.023) (0.118) (0.128) (0.113) NM (0.339) -53.4% (0.161) (0.520) Investment income and change in market value 0.347 0.479 (0.267) 0.275 22.2% 1.243 -26.7% 0.424 0.911 Foreign Currency Adjustment (0.184) 0.072 0.500 0.098 NM (0.770) NM 0.376 1.046 $ 7.320 $ 7.754 $ 7.857 $ 8.118 $ 19.6% $ 7.320 $ 19.6% Unit Linked Assets - End-of-Period 8.757 8.757 0.000 0.000 - - (0.001) - $ 17.521 $ 17.744 $ 18.289 $ 18.464 10.4% $ 17.521 10.4% Individual Life In-force $ 19.345 $ 19.345 Exchange Rate - Dollars to Pounds 1.747 1.754 1.829 1.878 10.5% 1.821 1.4% For-the-Period 1.930 1.847 1.719 1.737 1.849 1.872 13.9% 1.719 13.9% End-of-Period 1.958 1.958 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 31 Lincoln Financial Media Income Statements Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Results Communications revenues, net $ - $ - $ 57.5 $ 59.8 NM $ - NM $ 70.0 $ 187.4 Cost of sales - - 7.6 10.3 NM - NM 15.2 33.1 Operating expenses - - 22.2 21.0 NM - NM 21.7 65.0 Station operating income - - 27.7 28.5 NM - NM 33.1 89.2 Depreciation and amortization - - 6.0 2.7 NM - NM 2.6 11.3 General and administrative expenses - - 1.8 1.4 NM - NM 1.2 4.4 Taxes, licenses and fees - - - 1.5 NM - NM 1.8 3.2 Net interest expense and other - - 0.3 0.3 NM - NM 0.3 0.9 Income from operations before Federal income taxes - - 19.6 22.6 NM - NM 27.2 69.4 Federal income taxes - - 7.7 8.0 NM - NM 9.6 25.3 Income from Operations $ - $ - $ 11.9 $ 14.6 NM $ - NM $ 17.5 $ 44.0 Effective tax rate on Income from Operations 39.3% 35.4% 35.4% 36.5% (1) Other Operations Unaudited [Millions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Operating Revenue Premiums $ 0.1 $ 0.3 $ 0.3 $ 0.9 NM $ 1.0 NM $ 3.8 $ 5.3 Net investment income 40.3 39.6 72.1 59.6 31.8% 203.3 10.3% 53.1 224.3 Amortization of deferred gain on indemnity reinsurance (2) 18.9 18.8 18.8 18.8 -0.5% 75.7 -0.9% 18.8 75.0 Other revenue and fees (6.1) (1.8) (0.1) (4.5) 19.7% (6.1) -85.2% (4.9) (11.3) Inter-segment elimination of investment advisory fees (24.5) (25.1) (23.5) (23.3) -2.9% (98.8) 1.9% (25.2) (96.9) Total Operating Revenue 28.9 31.7 67.6 51.4 57.8% 175.2 12.1% 45.6 196.4 (0.1) 0.1 (0.0) (0.0) (0.0) (0.1) 0.0 Operating Expenses Insurance benefits (0.5) 1.6 4.1 3.9 NM 0.1 NM 7.3 17.0 Interest credited to contractholder funds 34.5 33.9 36.5 36.1 7.5% 133.0 8.0% 37.1 143.7 Operating and acquisition expenses 2.4 (1.2) 28.5 (7.3) NM 59.4 -9.6% 33.8 53.7 Taxes, licenses and fees 0.9 3.0 0.6 2.6 33.3% 4.3 72.1% 1.2 7.4 Interest 21.8 21.5 64.3 66.7 195.0% 87.2 148.7% 64.3 216.9 Inter-segment elimination of investment advisory fees (24.5) (25.1) (23.5) (23.3) -2.9% (98.8) 1.9% (25.2) (96.9) Total Operating Expenses 34.6 33.7 110.6 78.8 242.8% 185.4 84.3% 118.6 341.7 Income (loss) from operations before Federal income taxes (5.7) (2.0) (43.1) (27.4) NM (10.2) NM (73.0) (145.4) (3) Federal income taxes (15.4) (2.2) (17.0) (15.9) NM (64.5) -7.8% (34.5) (69.5) Income (loss) from Operations $ 9.6 $ 0.1 $ (26.1) $ (11.5) $ NM $ 54.3 NM (38.4) $ (75.8) - - 0.0 (1) Includes eliminations of intercompany transactions. (2) Represents the amortization of deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re. (3) Includes a reduction of the valuation allowance on the deferred tax asset of our foreign life reinsurance subsidiary of $5.7 million in the 1st quarter of 2005, $23.5 million in the 2nd quarter of 2005, $13.3 million in the 3rd quarter of 2005, $4.3 million in the 4th quarter of 2005, $46.8 million for the full year 2005 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 32 Consolidated Domestic Deposits/Account Balances Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change 2006 2006 Deposits - For the Period Individual Markets - Fixed Annuities $ 0.486 $ 0.471 $ 0.872 $ 1.062 $ 126.3% $ 1.987 $ 76.4% 1.100 3.505 Individual Markets - Variable Annuities 1.513 1.665 1.867 1.658 36.2% 5.539 30.9% 2.061 7.251 Individual Markets - Life Insurance 0.596 0.488 1.023 0.753 84.7% 2.030 65.8% 1.101 3.365 Employer Markets - Fixed Annuities 0.240 0.253 0.242 0.268 -23.8% 1.083 -12.7% 0.183 0.946 Employer Markets - Variable Products (1) 0.839 0.987 0.918 0.818 9.2% 3.320 9.6% 0.916 3.639 Employer Markets - Executive Benefits 0.052 0.047 0.077 0.058 63.5% 0.209 27.8% 0.085 0.267 Inv Mgmt - Annuities 0.713 0.885 0.869 0.960 30.7% 2.768 31.8% 0.932 3.647 Inv Mgmt - Mutual Funds 1.657 1.329 1.370 1.151 6.7% 5.994 -6.3% 1.768 5.617 Inv Mgmt - Managed Acct. & Other 1.260 1.806 1.043 0.386 -60.9% 6.339 -41.2% 0.493 3.728 Consolidating Adjustments (0.617) (0.481) (0.773) (0.817) -35.0% (2.435) -19.3% (0.833) (2.905) 6.737 7.449 7.509 6.297 15.9% 26.835 8.3% Total Gross Retail Deposits 7.805 29.060 Inv Mgmt - Institutional 4.833 5.044 2.764 2.406 1.1% 16.302 -7.4% 4.888 15.102 Consolidating Adjustments (0.265) (0.257) (0.365) (0.202) 58.9% (1.030) 9.4% (0.109) (0.933) $ 11.305 $ 12.236 $ 9.907 $ 8.501 $ 11.3% $ 42.107 $ 2.7% Total Gross Deposits 12.584 43.229 Account Balances - End of Period Individual Markets - Fixed Annuities $ 8.607 $ 8.362 $ 17.384 $ 16.894 $ 94.4% $ 8.607 $ 94.4% 16.733 16.733 Individual Markets - Variable Annuities 37.655 40.495 41.537 43.977 27.9% 37.655 27.9% 48.169 48.169 Individual Markets - Life Insurance 14.051 14.268 25.479 25.821 88.5% 14.051 88.5% 26.490 26.490 Employer Markets - Fixed Annuities 11.009 11.033 11.050 11.061 - 11.009 - 11.006 11.006 Employer Markets - Variable Products (1) 19.464 20.702 20.475 21.166 16.4% 19.464 16.4% 22.650 22.650 Employer Markets - Executive Benefits 1.318 1.387 4.228 4.252 226.6% 1.318 226.6% 4.305 4.305 Inv Mgmt - Annuities 13.287 13.998 13.577 14.129 14.0% 13.287 14.0% 15.151 15.151 Inv Mgmt - Mutual Funds 16.231 17.101 16.654 17.068 10.1% 16.231 10.1% 17.875 17.875 Inv Mgmt - Managed Acct. & Other 12.839 15.162 15.812 16.279 37.0% 12.839 37.0% 17.594 17.594 Consolidating Adjustments (12.602) (13.282) (13.057) (13.649) -16.5% (12.602) -16.5% (14.687) (14.687) 121.858 129.225 153.137 156.998 35.6% 121.858 35.6% Total Retail Account Balances 165.287 165.287 Inv Mgmt - Institutional 35.276 40.167 39.883 42.035 32.3% 35.276 32.3% 46.686 46.686 Consolidating Adjustments (3.422) (3.573) (3.557) (3.510) -5.3% (3.422) -5.3% (3.604) (3.604) $ 153.712 $ 165.820 $ 189.464 $ 195.524 $ 35.6% $ 153.712 $ 35.6% Total Account Balances 208.369 208.369 Total Domestic Net Flows Unaudited [Billions of Dollars] Three Months Ended Year Ended Dec. March June Sept. % Dec. % Dec. Dec. 2005 2006 2006 2006 Change 2005 Change For the Period Ended 2006 2006 Individual Markets - Life $ 0.400 $ 0.257 $ 0.548 $ 0.491 $ 81.8% $ 1.195 69.3% 0.727 $ 2.023 Individual Markets - Annuities 0.767 0.770 0.699 0.304 16.3% 2.876 -7.3% 0.892 2.665 Employer Markets - Defined Contribution (0.026) 0.181 0.114 0.037 138.5% 0.419 -18.4% 0.010 0.342 Employer Markets - Executive Benefits 0.049 0.039 0.035 (0.011) NM 0.161 -64.6% (0.007) 0.057 Investment Management - Retail 1.148 1.305 0.322 (0.300) NM 6.442 -81.6% (0.140) 1.187 Consolidating Adjustments 0.015 0.083 (0.009) 0.012 NM 0.051 NM (0.092) (0.007) 2.354 2.635 1.709 0.532 -41.0% 11.144 -43.8% Total Retail Net Flows 1.390 6.266 Investment Management - Institutional 1.733 3.592 0.687 1.046 53.8% 8.778 -9.0% 2.666 7.991 Consolidating Adjustments 0.198 (0.039) (0.047) 0.139 -65.7% 0.123 NM 0.068 0.121 $ 4.285 $ 6.188 $ 2.349 $ 1.717 -3.7% $ 20.045 -28.3% Total Net Flows $ 4.125 $ 14.378 (1) Includes amounts attributable to Alliance program mutual fund net flows. Account values for the Alliance program are not included in the separate accounts reported on our balance sheet. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 33 Consolidated Investment Data - Assets Managed Unaudited [Billions of Dollars] As of Dec. March June Sept. % Dec. 2005 2006 2006 2006 Change 2006 Assets Managed by Source LNC' Investments and Cash: s Fixed maturity securities - available for sale $ 33.443 $ 32.893 $ 54.024 $ 55.825 67.0% $ 55.853 Equity securities - available for sale 0.145 0.176 0.579 0.662 NM 0.700 Trading securities 3.246 3.190 3.109 3.172 -6.5% 3.036 Other investments 6.334 6.314 12.003 11.948 87.8% 11.898 Total LNC Investments 43.168 42.573 69.714 71.608 65.6% 71.488 Separate accounts 63.747 67.984 71.095 74.357 26.3% 80.534 Cash and invested cash 2.312 1.974 1.500 1.108 -29.9% 1.621 Total LNC 109.227 112.531 142.309 147.073 40.7% 153.642 Non-affiliate assets managed 62.528 70.464 70.185 73.227 27.8% 79.881 $ 171.755 $ 182.995 $ 212.495 $ 220.300 36.0% Total Assets Managed $ 233.523 Assets Managed by Advisor Investment Management segment (See page 28 for additional detail) $ 77.633 $ 86.428 $ 85.926 $ 89.511 25.3% $ 97.307 DLIA-Corp (Assets managed internally-see page 28) 43.086 41.995 65.637 67.410 55.7% 67.066 Lincoln UK 8.562 8.986 9.171 9.440 18.1% 10.108 Domestic Policy Loans (excluding Lincoln UK) 1.858 1.856 2.712 2.720 48.3% 2.755 Non-LNC Affiliates 40.617 43.729 49.049 51.219 38.6% 56.286 $ 171.755 $ 182.995 $ 212.495 $ 220.300 36.0% Total Assets Managed $ 233.523 - - - - - This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
    • 12/31/2006 PAGE 34 Consolidated Investment Data Unaudited [Millions of Dollars] Three Months Ended Dec. March June Sept. Dec. % 2005 2006 2006 2006 2006 Change Net Investment Income Fixed maturity AFS securities $ 509.7 $ 513.7 $ 829.0 $ 824.8 $ 65.1% 841.7 Equity AFS securities 3.3 2.1 8.6 7.9 157.6% 8.5 Trading securities 48.7 49.7 49.4 49.2 -0.2% 48.6 Mortgage loans on real estate 75.1 67.2 135.0 137.8 71.1% 128.5 Real estate 5.6 9.1 13.2 13.3 267.9% 20.6 Policy loans 29.2 29.7 42.5 43.0 49.7% 43.7 Invested cash 19.2 22.8 22.2 33.0 -18.8% 15.6 Other investments 7.0 14.6 10.2 41.3 NM 71.8 Investment revenue 697.9 708.8 1,110.1 1,150.3 68.9% 1,179.0 Investment expense (29.8) (30.4) (41.9) (42.4) -76.5% (52.6) Net Investment Income $ 668.1 $ 678.3 $ 1,068.2 $ 1,107.9 68.6% $ 1,126.3 0.0 Mean Invested Assets (Amortized Cost) $ 44,035.2 $ 44,363.6 $ 70,933.3 $ 70,646.9 $ 70,451.4 Ratio of Net Invest Income Over Mean Invested Assets 6.07% 6.12% 6.02% 6.27% 6.39% Three Months Ended Dec. March June Sept. Dec. % 2005 2006 2006 2006 2006 Change Realized Investment Gains (Losses) Fixed maturities $ (5.6) $ 4.4 $ 8.2 $ 6.7 $ 289.3% 10.6 Equity securities 2.2 0.2 (1.1) - NM - Other gains (losses), net 6.3 3.5 6.5 (5.5) -44.4% 3.5 Policyholders' interest (1.3) (1.8) (1.4) 2.0 NM 7.6 Capital gains expense (2.3) (2.4) - - NM - Sale of affiliate - - - - NM - Total pretax gains (losses) (0.8) 3.9 12.2 3.1 NM 21.7 Amortization of DAC, VOBA and deferred sales inducements (8.8) (10.9) (18.9) (8.9) -1.1% (8.9) Income taxes (3.3) (2.9) (3.0) (1.7) 203.0% 3.4 Realized investment gains (losses), net of taxes $ (6.2) $ (4.2) $ (3.8) $ (4.1) $ 251.6% 9.4 0.0 0.1 0.0 As of December 31, 2006 As of December 31, 2005 Amount % of Total Amount % of Total Available-for-Sale and Trading Securities [Millions of Dollars] Fixed Maturity Sec (Fair Value) $ 58,889.8 98.8% $ 36,687.1 99.6% Fixed Maturity Sec (Amortized Cost) 57,725.8 98.9% 35,347.6 99.6% Equity Securities (Fair Value) 700.2 1.2% 146.9 0.4% Equity Securities (Amortized Cost) 656.8 1.1% 139.0 0.4% % of Available-for-Sale Fixed Maturity Securities (Based on Fair Value) Treasuries and AAA 19.6% 23.4% AA or better 28.1% 30.9% BB or less 6.3% 7.4% General Account Investments As of December 31, 2006 As of December 31, 2005 Amount % of Total Amount % of Total Fixed maturities- security sector: Corporate bonds $ 45,489.4 81.4% $ 25,860.7 77.3% U.S. government bonds 263.4 0.5% 161.8 0.5% Foreign government bonds 1,141.6 2.0% 1,203.3 3.6% Mortgage backed securities 8,691.3 15.6% 5,951.2 17.8% State and municipal bonds 159.4 0.3% 128.8 0.4% Preferred stocks - redeemable 108.3 0.2% 137.4 0.4% Total $ 55,853.4 100.0% $ 33,443.2 100.0% $ 0.0 As of Dec. March June Sept. % Dec. 2005 2006 2006 2006 Change 2006 Composition of Investment Portfolio: Securities available-for-sale, at fair value: Fixed Maturity $ 33,443.2 $ 32,892.8 $ 54,024.1 $ 55,824.9 67.0% $ 55,853.4 Equity 144.7 176.0 578.5 662.0 NM 700.2 Trading securities 3,246.0 3,190.1 3,109.0 3,172.5 -6.5% 3,036.3 Mortgage loans on real estate & real estate 3,845.3 3,766.5 8,169.7 8,004.5 103.0% 7,805.6 Policy loans 1,862.2 1,860.4 2,716.4 2,724.9 48.2% 2,759.7 Derivative Investments 174.7 199.3 279.6 349.4 137.7% 415.3 Other investments 452.2 488.2 837.0 869.3 102.8% 917.1 Total $ 43,168.4 $ 42,573.2 $ 69,714.4 $ 71,607.5 65.6% $ 71,487.6 0.000 0.000 $ 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.